Portman Calls for Overhaul of Corporate Tax Code in Wall Street Journal Op-Ed

Targeted News Service |

WASHINGTON, June 25 -- The office of Sen. Rob Portman, R-Ohio, issued the following article: In case you missed it, U.S. Senator Rob Portman (R-Ohio) stressed the urgency of fundamental corporate tax reform in today's Wall Street Journal. Portman argues that with the U.S. having the highest corporate tax rate in the world, American businesses are more likely to relocate overseas and more vulnerable to foreign takeovers. Without prompt congressional action, Portman argues, the flight of American businesses overseas will continue. Excerpts of the Op-Ed are below and it can found in its entirety here (http://online.wsj.com/articles/rob-portman-with-businesses-fleeing-america-congress-must-act-1403651765). With Businesses Fleeing America, Congress Must Act Sen. Rob Portman Wall Street Journal June 25, 2014 American businesses are heading for the exits to escape the U.S. tax code. Medical device company Medtronic announced recently that it planned to acquire the Ireland-based firm Covidien and relocate headquarters in Dublin, making it the biggest company yet to leave our shores for a more favorable tax climate. It's just the latest example, and the flight will continue until the U.S. reforms its outdated, uncompetitive tax code. The basic U.S. corporate tax rate is 39\%, the highest on the planet. The average rate among other major industrialized countries is 25\%. Worse, the U.S. tax rate applies not only to income earned within U.S. borders, but also to profits American companies make overseas. That is in large part why more than 20 major American companies have reincorporated elsewhere in the past two years. In 2012, for example, Eaton, a manufacturing company from my home state of Ohio, merged with Cooper Industries, a much smaller Irish company. The new company established its headquarters in Dublin, substantially reducing its tax liability in the process. Businesses are willing to pay to put a few miles between them and the IRS: U.S. companies in 2013 paid upward of 55\% more than their target's market price for deals that allowed them to move overseas, according to a May report in this newspaper. Domestic mergers, on the other hand, usually only yield a 20\% premium. ... Forcing U.S. companies to stay here is no solution. Congress has tried that before, and several of my colleagues have again proposed ratcheting up existing IRS rules that penalize certain cross-border mergers. That piecemeal approach will only hurt American employers and workers who, as a result, will be even less competitive in a global economy built on free movement of capital and labor. The president and Congress should instead overhaul the tax system, as other countries around the world have already done. To attract investment, Canada in 2012 lowered its federal corporate tax rate to 15\%, the last cut of a seven-point decline that began in 2006. In fact, every single one of our major foreign competitors has reduced its corporate tax rate in the past 20 years. ... Here's what the U.S. can do to catch up: First, cut the corporate tax rate to 25\%, bringing America in line with the OECD average. That would undoubtedly spur job creation. It would also bolster revenues, as the nonpartisan Joint Committee on Taxation showed in its February analysis of Ways and Means Committee Chairman Dave Camp's tax-reform proposal. Second, simplify the tax code, which is rife with special preferences, and use the money saved from closing those loopholes to finance the 10 percentage point rate reduction. Third, create a more competitive international tax regime. Roughly 80\% of the world's purchasing power and 95\% of its consumers are beyond U.S. borders, and American companies must be able to compete for these customers. As such, the U.S. should adopt a territorial-type tax system that taxes active business income only where it's earned. In addition, we should implement clear, enforceable rules to prevent sheltering income in low-tax countries. Congress should act immediately to end the flight of U.S. businesses by overhauling the corporate tax code. That would go a long way in making America a magnet for investment again. TNS 24KuanRap-140628 30FurigayJof-4782403 30FurigayJof

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