U.S. Senator Rob Portman (R-Ohio), a member of the Senate Budget and Finance Committees, added an amendment to the Democrats' budget being debated on the Senate floor that would repeal the budget's proposed tax increases and instead create a deficit-neutral reserve fund for legislation that would simplify the corporate tax code through lower rates and fewer tax preferences and loopholes.
"Our complex, expensive, and inefficient tax code has become an obstacle to growth. As our economy continues to struggle through the weakest recovery in our nation's history, I'm hearing a lot from Ohio companies and manufacturers hoping for a simpler code with a lower overall rate," Portman said. "Our tax code has become a drag on the economy as excessive tax rates on business income decrease the incentive to build and invest in the United States and put American workers at a competitive disadvantage. Corporate tax reform done right will boost U.S. competitiveness and reduce the deficit through growth. We must do all we can to enact these reforms and put America back on a path to prosperity."
There is a broad and growing consensus that our tax system is plagued by excessively high rates on business and labor income, a complex maze of tax preferences, and an outdated approach to American businesses competing for customers abroad. As the Organization for Economic Cooperation and Development (OECD) has reported, high corporate tax burdens are "most harmful to growth."
Yet as our major trading partners have slashed their rates to attract jobs, the U.S. corporate rate last year became the highest among our major industrialized competitors. The OECD average is 25.1%, while the U.S. rate stands at 39.2% when you include state and federal burden.
Just as President Reagan and Democrats and Republicans in Congress did in 1986, we can cap or eliminate inefficient tax preferences and loopholes and use that revenue to reduce both the tax rates without adding a dime to the deficit.
The merits of such deficit-neutral tax reform have bipartisan support. The Treasury Department's February 2012 white paper called for eliminating the tax preferences while at the same time "reinvesting these savings to lower the corporate tax rate putting the United States in line with major competitor countries and encouraging greater investment in America." Similarly, President Obama called for revenue neutrality in his 2011 State of the Union address, stating we should "use the savings" from eliminating tax preferences to cut the corporate rate.