| 866-832-4674 | P.O. Box 33817, Washington DC, 20033. June 3 ... venture capital to look outside
June 3, 2014 The Honorable Ron Wyden Chairman Committee on Finance United States Senate 219 Dirksen Senate Office Building Washington, D.C. 20510 The Honorable Orrin Hatch Ranking Member Committee on Finance 219 Dirksen Senate Office Building Washington, D.C. 20510
Dear Chairman Wyden and Ranking Member Hatch: We are writing on behalf of the 32 American businesses and associations that make up the RATE Coalition - representing over 30 million employees and across all 50 states - in regard to the current debate over corporate tax inversions. As you both know, the economic preeminence of the United States is now at risk: Our uncompetitive tax code is harming American competitiveness. It is driving American business, and jobs, to relocate to more tax-friendly jurisdictions. You both have articulated the problems associated with inversions and the costs to the U.S. economy; all Americans should be concerned. However, recent proposals to restrict the practice of inversions will be counterproductive and fail to address the real issue – our outdated and uncompetitive tax code. Since 1986, America’s federal corporate tax rate has remained at a standstill – 35 percent – while other nations have continuously lowered theirs to compete for jobs and growth. Indeed, the weighted average corporate tax rate of the OECD nations is now 25 percent—a full 10 points lower than that of the US. And some countries, such as Ireland, have rates significantly lower than that. Indeed, if we factor in the impact of state corporate income taxes—the average across the nation is 4.2 percent—we see that American corporations today are confronted with a corporate tax rate that can be more than three times higher than our competitors. This is ultimate source of the inversion phenomenon. www.RATEcoalition.com
[email protected] | 866-832-4674 | P.O. Box 33817, Washington DC, 20033
We believe that short-term solutions, such as proposed legislation to restrict corporate inversion deals, are shortsighted and protectionist and will surely drive investment overseas and cause venture capital to look outside the U.S. before starting a company. Any true tax reform must also address the underlying issues, not just the symptoms. For example, revenue raised from tax reform should go towards bringing down the rate, rather than being used to pay for infrastructure or other spending initiatives. The time for tax reform is now. The data show that approximately 50 inversions have occurred through 2013. Since 2011 alone, 20 have taken place; most of those were done through mergers. Furthermore, these companies are no longer moving to so-called “tax havens”; instead they’re redomiciling in countries like the U.K. and Canada, whose tax codes are more modern, efficient, and competitive. The U.K. is now lowering its rate to 20 percent and Canada’s rate is 26.3 percent. U.S. tax reform can be done in a revenue-neutral way that will bring companies back to our shores and put U.S. businesses in the position to fully compete, once again, with their international rivals. RATE’s member companies understand that modernizing the tax code will require tradeoffs and to that end are willing to put their respective tax exemptions on the table in return for a competitive rate. Thank you for your consideration of the important issue and please consider our point about avoiding punitive solutions that do not address the root of the problem. Sincerely,
Elaine Kamarck
James P. Pinkerton
www.RATEcoalition.com
[email protected] | 866-832-4674 | P.O. Box 33817, Washington DC, 20033
