What and Why is Comprehensive Business Tax Reform in USA Important?

The United States now has the highest statutory business tax rate among the major industrial countries. The companies owe taxes at the full U.S. corporate tax rate of 35 percent on profits they earn around the world. They get tax credits for payments to foreign governments and don't have to pay the residual U.S. tax until they bring the money home.

Among most other developed nations, U.S. is the only one that taxes foreign income.This places businesses at a distinct competitive disadvantage since most foreign competitors are not required to pay a similar tax to their home countries. This particular aspect of the U.S. tax code poses real challenges when it comes to global investment decisions and the return of foreign profits to the U.S.

A reduction in the business tax rate to at least 25% must be accompanied with other proposed reforms such as reevaluating whether foreign tax credits are necessary given that they are utilized as an offset against the high corporate tax rate. 

The current U.S. tax rate of 35% provides such a large disincentive that few U.S. multi-national companies choose to bring foreign earnings home to the U.S. America's tax system is out of date and not competitive. Last updated in 1986 and hence needs a reform.