U.S. Sen. John Thune (R-S.D.) this week discussed one of the principles that will guide Senate Republicans’ pro-growth, comprehensive tax reform legislation: keeping America competitive in the global economy. Thune explained that since the United States has the highest corporate tax rate in the world – 10 percentage points higher than the majority of our international competitors – our current tax code is making it difficult for American businesses with an international footprint to compete in the global economy.
Thune’s remarks (as prepared for delivery):
“Mr. President, a recent survey reported that 50 percent of voters consider themselves to be living paycheck to paycheck, while a third of voters say they are just $400 away from financial crisis.
“That’s not acceptable.
“Unfortunately, after eight years of economic stagnation under the Obama administration, living paycheck to paycheck has started to feel like the new normal to many Americans.
“But it doesn’t have to be.
“We have the resources to have the strongest economy in the world.
“American workers and job creators are as dynamic and creative as ever, and they can get our economy thriving again.
“But in order to let them do that, we need to clear some obstacles from their path.
“And that starts with reforming our complicated and outdated tax code, which has been increasingly strangling our economy.
“This fall, Republicans in the House and Senate are making comprehensive tax reform one of our top priorities.
“After weeks of work, last week leaders from the Senate, House, and White House unveiled the framework that will guide our final tax reform legislation.
“The framework is built around Republicans’ five principles for tax reform:
“Providing tax relief for the middle class
“Increasing wages, jobs, and economic growth
“Keeping good-paying jobs here at home
“Increasing American competitiveness in the global economy
“And simplifying the tax code
“The framework outlines our plans to provide relief for middle-class families.
“For starters, we will lower tax rates for hardworking Americans.
“By collapsing the seven income-tax brackets to three, we will ensure working families get to keep more of what they earn.
“Our plan will also expand the child tax credit and make it available to more families.
“And our plan doubles the standard deduction, which will provide significant relief to those who need it the most.
“Under our plan, a family making $24,000 a year will no longer owe any federal income taxes.
“Mr. President, all of these measures will provide direct relief to working families.
“Just as important for families, however, is the other half of our tax reform plan, which involves creating the kind of economic environment where hardworking Americans can thrive.
“The kind of environment where Americans have access to good jobs, higher wages, and more opportunities.
“Over the past few weeks, I’ve come down to the floor to talk about Republicans’ tax reform principles, and I’ve highlighted some of the ways our tax reform plan will improve the economic outlook for American families.
“Last week, I talked about our third principle: reforming our tax code to keep good-paying jobs here at home.
“This week I’d like to spend a few minutes talking about our fourth principle: keeping America competitive in the global economy.
“In order for individual Americans to thrive economically, we need our businesses to thrive.
“Thriving businesses create jobs.
“They provide opportunities.
“And they increase wages and invest in their workers.
“Right now, though, our tax code is not helping businesses thrive.
“And it’s making it difficult for American businesses with an international footprint to compete in the global economy.
“Our nation has the highest corporate tax rate in the industrialized world – at least 10 percentage points higher than the majority of our international competitors.
“Now it doesn’t take an economist to realize that high tax rates leave businesses with less money to invest.
“Less money to spend on wages.
“Less money to create new jobs.
“Less money to devote to research and development of new products and services.
“And less money to put back into new property or equipment for their businesses.
“And this situation is compounded when you’re an American business with international competitors who are paying a lot less in taxes than you are.
“It’s no surprise that U.S. businesses struggling to stay competitive in the global economy don’t have a lot of resources to devote to creating new jobs and increasing wages.
“And on top of our high business tax rates, there’s another major problem with our tax code that puts American businesses at a competitive disadvantage globally: our outdated worldwide tax system.
“What does it mean to have a worldwide tax system?
“It means that American companies pay U.S. taxes on the profit they make here at home, as well as on part of the profit they make abroad, once they bring that money home to the United States.
“The problem with this is that most other major world economies have shifted from a worldwide tax system to a territorial tax system.
“In a territorial tax system, you pay taxes on the money you earn where you make it, and only there.
“You aren’t taxed again when you bring money back to your home country.
“Most of American companies’ foreign competitors have been operating under a territorial tax system for years, so they’re paying a lot less in taxes on the money they make abroad than American companies are.
“And that leaves American companies at a disadvantage.
“These foreign companies can underbid American companies for new business simply because they don’t have to add as much in taxes into the price of their products or services.
“And when foreign companies beat out American companies for new business, it’s not just American companies who suffer: It’s American workers.
“That’s why a key part of the tax framework Republicans unveiled last week involves lowering our massive corporate tax rate and transitioning our tax system from a worldwide tax system to a territorial tax system.
“By making American businesses more competitive in the global economy, we can improve the playing field for American workers.
“Mr. President, there are a lot of other things we’re going to do to help hardworking families and American workers, from improving the tax situation for small businesses to helping family business owners, farmers, and ranchers, like those in my home state of South Dakota, by repealing the death tax.
“Our colleagues on the other side of the aisle like to complain about our plans to repeal the death tax.
“They complain that it’s not something to really worry about, since, they claim, relatively few estates are expected to actually have to pay the tax.
“Well, I’d like them to come talk to some of the farmers and ranchers in my state.
“Some of these farmers and ranchers are paying tens of thousands of dollars a year in an effort to avoid having their families hit by the estate tax when they die.
“Because they know that without careful and costly planning, if the federal government comes around after their death demanding a staggering 40 percent of their estate, their children won’t have the money to pay the government without risking the farm or ranch.
“Mr. President, farming and ranching is a cash-poor business.
“Farmers and ranchers own valuable land, but they’re only earning cash on the crops they grow or the livestock they raise on that land.
“Thus, while their overall farm or ranch may have a substantial value, the amount of money they have coming in is relatively small, and subject to the swings in the market from year to year.
“Too often, when farmers and ranchers die, the vast portion of their estate is made up of their land, while actual disposable income is a very small part of it.
“If they don’t take measures to avoid having their family hit by the death tax, the family will have no choice but to sell off some or all of their land to pay the government – which means losing the family’s farm or ranch.
“And the same situation faces other types of family-owned businesses across the country where the value of the estate is tied up in that business.
“Removing the threat of the death tax for family-owned businesses, farms, and ranches would free up resources that these business owners could invest in their business and in our economy, instead of in complex estate plans, insurance, and expensive tax professionals.
“And before I move on, let me just remind everybody that when we talk about the death tax, we’re talking about double and sometimes triple taxation.
“The money the government is taxing?
“It’s already been taxed at least once.
“It boggles the mind that some think that a person’s death is justification for taxing his income a second or third time.
“Mr. President, our tax code is increasingly strangling our economy and placing heavy burdens on hardworking American families.
“If we want to improve the economic situation of American families, comprehensive tax reform is essential.
“Republicans in the House and Senate are continuing to work on the final draft of the bill we’ll take up later this fall.“I look forward to passing comprehensive tax reform legislation that will help American families thrive.”