About the Problem

The U.S. tax code is uncompetitive. 

Right now, the U.S. tax system incentivizes companies to keep profits overseas by putting a double tax on the foreign earnings of U.S. companies when they are brought back to the United States.

Taxes

About the Policy

In order to allow U.S. companies to better compete with foreign companies, the U.S. should move toward a “territorial” tax system, in which U.S. companies pay tax only on the income they earn at home. Modernizing our current corporate tax system will encourage American companies to bring their earnings home, invest more in the American economy and put more Americans back to work.

Public Support

77% of All Polled
79% of Democrats
79% of Republicans
73% of Independents

Polling data derived from three national surveys conducted by Cohen Research Group in February and March 2016. Each survey had a sample size of at least 1,000 registered voters with a margin of error of +/- 3.1%

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The United States currently has the highest corporate tax rate in the developed world, according to the OECD Tax Database.

In fact, the U.S. has maintained the highest corporate tax rate in the OECD since 2007. Even after adjusting for deductions, credits, and other measures, the average effective tax rate is still 27.9%, the second-highest among OECD countries.

We are also one of only six developed countries that has a worldwide business tax system, in which US companies pay taxes twice on foreign earnings: once in the country where the income is earned and once when the income is brought back to the U.S.

Our country’s high corporate tax rate and our antiquated worldwide taxation system diminishes investment and job creation, and stunts innovation and job growth.

The high corporate tax rate has led many U.S. companies to move overseas in a move commonly referred to as a ‘corporate inversion’. U.S. companies can reincorporate in a foreign country by either creating or buying-out a foreign parent company. The company can still retain all of its property, holdings, and employees in the U.S. but it pays taxes only in the foreign country that they have reincorporated to.

How do we solve this problem? To encourage companies to invest and create jobs in America, we should reduce the corporate tax rate to a level (25%) that makes America more competitive with other countries. This reduction can be paid for by eliminating special interest tax credits and deductions.

America should also replace its system of worldwide taxation with a “territorial” tax system, in which U.S. companies pay tax only on the income they earn in the U.S.