Congressman’s Bill Would Make Tax Reform Easy as ‘ABC’

Published April 21, 2016

Congress is considering a major corporate tax reform bill its proponents say would help to slow the growth in the number of U.S.-based businesses merging with foreign competitors and leaving the country by repairing flaws in the tax system.

In January, U.S. Rep. Devin Nunes (R-CA) proposed House Resolution 4377, titled the American Business Competiveness Act (ABC). The bill was referred to the House’s Committee on Ways and Means in the same month.

The legislation would make doing business in America more attractive by reducing taxes on profits earned by companies headquartered in the United States from 35 percent to 25 percent.

The ABC Act would also change the U.S. tax code from a worldwide tax system, in which profits are taxed regardless of where they are earned, to a territorial system, taxing only profits earned within the country, a model used by all but 6 countries in the world.

Addressing Root Causes

Grover Norquist, president of Americans for Tax Reform, says the only way to stop corporations from relocating to friendlier business climates is to improve the U.S. tax code.

“The only way to stop corporate inversions, American companies being bought by foreign firms or relocating their company overseas, is to reduce the high corporate income tax,” Norquist said. “American business taxes must be brought down to below 20 percent. At 20 percent, plus the 4.8 percent state corporate taxes, the United States has a 25 percent rate, which is the European average.”

Great, Not ‘Average’

Norquist says lawmakers must strive to make America better than “the European average.”

“I don’t know about you, but my goal is to be better than the ‘European average,’ … not average and certainly not European average,” Norquist said. “That sounds like a recipe for decline.”

Tax Code Reform ‘Overdue’

Michi Iljazi, a policy manager for the Taxpayers Protection Alliance, says the U.S. tax code is long overdue for a massive overhaul.

“It’s been three decades since the last time there was comprehensive reform of the tax code in America, so it is long past overdue,” Iljazi said. “Corporate inversions are the result of a punitive tax code that has stifled businesses in this country, and there’s no clearer indicator of this than the fact that the United States retains the top rate for corporate taxation in the developed world. That dubious distinction has been an albatross around neck of the private sector.”

Iljazi says he’s not surprised more businesses are leaving America.

“When you add all of the onerous regulations that companies have had to deal with over the last several years, the combination is sure to lead to corporations taking their business elsewhere,” Iljazi said. “Congress should work in a bipartisan manner with the president to get tax reform done, and it should be reform that helps to encourage economic growth for everyone.”

Matt Hurley ([email protected]) writes from Cincinnati, Ohio. D. Brady Nelson ([email protected]) writes from Washington, DC.