RATE Coalition Comments on Corporate Tax Reform

The Hon. Mark Mazur

As President Obama and his advisers continue in preparations for the 2015 State Of The Union (SOTU) address on January 20, we, the undersigned co-chairs of the RATE Coalition (Reforming America's Taxes Equitably) wish to call your attention to a potentially fruitful area of bipartisan compromise that could boost the economy and create millions of good jobs at good wages in the years to come.

The RATE Coalition, representing 33 companies and trade associations proudly employing more than 30 million men and women in all 50 states, has been in existence since 2011. Since then, our bipartisan coalition has had the same mission: the enactment of business tax reform.

We believe that corporate tax reform done right -- that is, lowering the statutory rate to an internationally competitive level while broadening the tax base -- will have a tonic effect on economic growth and job creation. And we are gratified that the Obama administration has long shared our concern: Just on December 16, Jason Furman, Chairman of the White House Council of Economic Advisers, cited "reforms to the business tax code" as a top priority.

As you know, the United States has not reformed its tax code since 1986. And in the nearly 30 years since then, the U.S. tax code has become increasingly unfair and complex, in part due to rampant tax exemptions as well as an uncompetitive corporate rate. Indeed, in the last three decades, the weighted average corporate tax rate of the Organization for Economic Cooperation and Development (OECD) countries has fallen in half, to 25 percent, while the U.S. corporate tax rate has actually ticked up a point, to 35 percent.

In other words, the U.S. today has the highest corporate tax rate in the developed world at 35 percent, a full 10 percentage points higher than the average for the other OECD countries. And if one includes the average state corporate income tax, the rate facing U.S. companies is a daunting 39.1 percent. It's easy to see how this high rate has been a dampener on the growth of jobs and wages in the U.S., even as it incentivizes American companies to seek new ways of avoiding the statutory rate.

Indeed, it's fair to say that the rash of corporate "inversions" is due, in large measure, to the punishingly high U.S. corporate rate. And that's why the RATE Coalition believes that attempts to restrict inversions through regulation alone are doomed to disappointment: the basic problem is the high rate, and until that's addressed, lawyers and lobbyists and accountants will continue to find new ways to avoid its deleterious impact.

Meanwhile, the public, as well as the policy community, is increasingly alert to this crisis of the corporate tax code. Indeed, we gratefully acknowledge the fine work done in recent years by former Senator Max Baucus, as well as the work his successor as Chair of the Finance Committee, Sen. Ron Wyden. Together, former Sen. Baucus and Sen. Wyden have helped to build the case for tax reform and helped outline the possible parameters of consensus.

And now, of course, their work, and the work of retiring House Ways and Means Committee Chair Dave Camp, will contribute to the efforts of the new leaders of the Senate and House tax-writing committees, Sen. Orrin Hatch and Rep. Paul Ryan. They, joined by many of their colleagues have said that they stand ready to roll up their sleeves and hammer out bipartisan compromise legislation that will provide the US economy with a lower corporate tax rate -- and a much-needed boost.

In addition, and perhaps most saliently, the President himself has endorsed business tax reform, in each of his last four SOTU Addresses. (We have included the relevant language along with this letter.)

So the RATE Coalition looks ahead to 2015 and sees a remarkable alignment of interest on both ends of Pennsylvania Avenue. We believe that the Obama administration and the Congress can come together in the 114th Congress to make business tax reform a reality for all Americans.

Moreover, we believe that the strong public support for making the code simpler, fairer and more competitive is rooted in the fundamental fact that today's code is broken. It is holding our country back and as a result, investment is limited, uncertainty is high, and too many paychecks are stagnant.

However, the problem is more than just the tax rate -- it's also the tax code itself. Business owners large and small must navigate a maze of complicated rules to comply. Already too complex, the tax code has, in fact, gotten longer and more complex every year. Our members have seen first-hand that our outdated, overcomplicated tax code has limited the ability of U.S. companies to invest, hire and grow business here at home.

No wonder, then, that the national appetite for tax reform is growing. The American people want reform that combines a simpler, fairer tax code with fewer loopholes and a lower corporate rate. After all, tax reform would increase the competitiveness of U.S. businesses, giving companies the incentive to do business here, bringing jobs back to our shores, alleviating wage stagnation, and, importantly, establish much-needed fairness for American companies in the U.S. tax code.

Thank you for your attention to this important matter.

"I'm asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years."

2012:

"We should start with our tax code. Right now, companies get tax breaks for moving jobs and profits overseas. Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it. So let's change it."

2013:

"Now is our best chance for bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit. The American people deserve a tax code that helps small businesses spend less time filling out complicated forms, and more time expanding and hiring . . . a tax code that lowers incentives to move jobs overseas, and lowers tax rates for businesses and manufacturers that create jobs right here in America."

2014:

"So let's make that decision easier for more companies. Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here, and reward companies that keep profits abroad. Let's flip that equation. Let's work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs here at home."