For NCAA basketball fans, “March Madness” ended last night when the University of Kentucky won the national title. For the U.S. economy, however, the “March toward Madness” continues.
I refer to our nation’s new status as the owner of the top corporate tax rate in the developed world. On April 1, when Japan’s new lower rate took effect, the U.S. acceded to the top spot.
The irony that the United States would claim the title of top corporate tax rate on April Fools’ Day is readily apparent. While the rest of the world has been aggressively lowering corporate tax rates to make their companies more competitive and to attract job-creating foreign investment, the United States has sat on the sidelines.
In fact, the last major overhaul of the U.S. corporate tax system was back in 1986 — a time when the Iron Curtain still divided Europe, the Internet was barely in use and China’s economy was still a sleeping giant. Our international system is even more of an antique, for the most part dating back to the early 1960s, when the Beatles first toured the United States.
While times have changed and the world economy has been drastically altered, the United States corporate tax system remains mired in complexity and stuck with high rates that stifle economic growth and job creation. The current combined federal and state corporate tax rate of 39.2 percent is nearly 15 percentage points above the average rate for our major competitors. The United States is also the only country in the G-8 with an international tax system that discourages companies from bringing back their foreign business earnings for reinvestment in the U.S. economy.
To highlight the fact that our tax system is woefully out of date, on April Fools’ Day Business Roundtable began surprising its website audiences with a temporary redesign of www.brt.org to include images of Ronald Reagan and other political leaders of that era, as well as references to outdated technologies and other reminders of life in the 1980s. It’s meant to be a not-so-subtle reminder to policymakers that while the world and the way we do business has changed significantly, our tax policies remain stuck in a different age.
Major reforms to the U.S. corporate tax system, to include a lower rate and a competitive system for taxing foreign earned income, are long overdue. BRT’s tax recommendations are outlined in its recently released “Taking Action for America: A CEO Plan for Jobs and Economic Growth.”
Matthew M. Miller is a vice president for the Business Roundtable.