For years, the calls for comprehensive tax reform have filled the air in Washington but produced little legislation. With the indisputable need for comprehensive tax reform clear to all, it is a reasonable question to ask Congress and the president — what are you waiting for?
In just the past few weeks alone, we have witnessed the negative impact our bloated and outdated tax code has on economic growth, American competitiveness and families across the nation.
According to press accounts, Walgreen Co. is contemplating moving its corporate headquarters overseas from Deerfield, Ill., and Pfizer is attempting to acquire a British pharmaceutical company for tax reasons. These are not isolated moves — just the latest example of a growing number of companies moving their headquarters overseas, largely due to the corporate disadvantage of doing business here in the United States.
Under current law, U.S. companies are subject to a 35 percent tax on their U.S. profits, the highest corporate tax rate in the developing world. Although some companies take advantage of loopholes to pay a much lower effective tax rate, many do not, and to stay competitive, it makes financial sense for many of them to relocate abroad.
This not only pulls needed tax revenue from federal and state governments in the U.S. but also takes U.S. jobs and economic growth with it. In addition, our role as the world’s leading innovator is threatened when the creators of life-saving medical therapies and technological advancements leave our shores.
The impact of the dysfunctional tax code is also felt directly by American workers and their families as they rush to collect receipts, double-check their math and file their returns with the Internal Revenue Service as they recently did, just hoping that they didn’t misread one of the many confusing instructions or make a miscalculation. The IRS estimates Americans spend on average 13 hours preparing their taxes. The IRS itself says it is overwhelmed with questions from taxpayers seeking to speak with a customer service representative, and that the agency answered only 61 percent of the calls. For those lucky enough to get through, wait times approached 20 minutes.
For American families struggling along with the economy, this is unacceptable. The tax system needs to be streamlined and simplified so it works for all American families and businesses rather than creating needless paperwork.
Carefully designed tax reform has the potential to reduce the $1.2 trillion worth of tax preferences in the tax code as well as lower rates, improve simplicity, reduce economic distortions, increase international competitiveness, promote economic growth, maintain the current progressive tax structure and reduce the deficit. Finally, reforming the tax code, along with important entitlement reforms to help deal with growing healthcare costs and the aging of the population, are key to getting our national debt under control.
What more evidence do Congress and the president need to take action? House Ways and Means Committee Chairman Dave Camp (R-Mich.) recently put out a comprehensive tax reform plan, and former Senate Finance Committee Chairman — now U.S. Ambassador to China — Max BaucusMax Sieben BaucusBiden nominates Nicholas Burns as ambassador to China Cryptocurrency industry lobbies Washington for 'regulatory clarity' Bottom line MORE offered several proposals at the end of last year. New Senate Finance Committee Chairman Ron WydenRonald (Ron) Lee WydenOn The Money — House pushes toward infrastructure vote Hillicon Valley — Presented by Xerox — EU calls out Russian hacking efforts aimed at member states Why Democrats opposing Biden's tax plan have it wrong MORE (D-Ore.) has previously offered his own bipartisan tax reform proposal with Indiana Republican Sen. Dan CoatsDaniel (Dan) Ray CoatsOvernight Hillicon Valley — Scrutiny over Instagram's impact on teens Former national security officials warn antitrust bills could help China in tech race Cyber preparedness could save America's 'unsinkable aircraft carrier' MORE. The rest of Washington, it seems, is inclined to take a pass once again.
With a full six months before the next election, surely Congress and the president can find the time to pass legislation that would promote economic growth and American competitiveness and help reduce the burden on workers and their families. If they can’t, maybe they should just move to Europe, too.
Gregg was senator from New Hampshire from 1993 to 2011 and governor of New Hampshire from 1989 to 1993. Rendell was governor of Pennsylvania from 2003 to 2011 and mayor of Philadelphia from 1992 to 2000. Gregg and Rendell are co-chairmen of the Campaign to Fix The Debt.