Tax reform to boost the economy

For the upcoming Republican debate to be held in Boulder later this week, I have a simple request of the debate moderators: Ask the assembled candidates what they would do to grow the American economy. My good friend David Winston did an analysis of the first two debates and found that despite the fact that American people care most about plans to fix America’s ailing economy, that subject rarely came up. Mostly the debate moderators wanted to create conflict between the candidates. I guess that makes for better television, but it doesn’t answer the question that is top of mind for most voters: What will you do to fix the economy?

That the economy is weak is not in question. The New York Times called the latest jobs report “grim” and “unexpectedly dismal.” Indeed, a record 94.6 million adult Americans are not in the labor force; the “labor force participation rate” is the lowest since the late 70s. A new poll from the Pew Research Center finds that among Republican voters the economy ranks more than 20 points ahead of immigration as a “very important” issue. And so, under the radar, as it were, a powerful consensus is growing among the Republican candidates that comprehensive tax reform, with a special emphasis on corporate tax reform, is vitally important to the growth of American jobs. The American corporate tax rate is the highest in the industrialized world— the federal rate is 35 percent, and the rate rises to 39 percent when state and local corporate taxes are included.

{mosads}By contrast, the average corporate tax rate for our most serious competitors within the three-dozen countries of the Organization for Economic Cooperation and Development is just 25 percent—a full ten points less. In other words, we have the dubious distinction of leading the world when it comes to high corporate tax rates. And that sad fact is hurting us, badly; it is causing the profoundly demoralizing phenomenon of “corporate tax inversions”—that is, U.S. companies leaving the US in search of a lower tax system elsewhere. Donald Trump’s tax reform slashes the corporate tax rate to 15 percent. Jeb Bush would lower it to 20 percent. Gov. Chris Christie (N.J.) and Sen. Marco Rubio (R-Fla.) would lower the rate to 25 per cent. And Sen. Rand Paul (R-Ky.), in an attempt to reform the entire U.S. tax system, would replace the corporate tax with a 14.5 percent business transfer tax, which would be levied on capital income and labor payments.

Bush has been perhaps the most vocal of the Republicans on this issue. As he wrote in The Wall Street Journal on September 8, “To stop American companies from moving out of the country, I will cut the corporate tax rate from 35 percent—the highest in the industrial world—to 20 percent, which is five percentage points below China’s.” As Bush has said, his goal is for the US to double its economic growth rate, to four percent; he adds that America’s tax code should be so pro-business that foreign companies “invert” their way into America. It would be good to have a further discussion among these candidates about their plans to grow the American economy and their ideas on how to make our corporate tax rate more globally competitive. Corporate tax reform is not particularly popular with the voting public. Some Americans believe, erroneously, that most companies don’t pay anything in taxes. Others believe that cutting the corporate tax rate won’t have any impact on their daily lives. But the fact is that when companies relocate to lower tax jurisdictions overseas, places like Ireland and Japan, American employees and small businesses feel the impact immediately. It hurts our economy and it hurts our workers. And it is happening all the time! And that’s why it is important that upcoming debate focus on this vitally important issue. The American people want to know who has the best plan to grow the American economy. That’s the issue that should be front and center in the next debate.

Pinkerton is the co-chair of the RATE (Reforming America’s Taxes Equitably) Coalition, a bipartisan group working for corporate tax reform