Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

It's Past Time for Tax Reform Lowering Corporate Taxes Would Make U.S. and Pennsylvania Businesses More Competitive

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

It's Past Time for Tax Reform Lowering Corporate Taxes Would Make U.S. and Pennsylvania Businesses More Competitive

Article excerpt

It's been a long time since the federal tax code was reformed. The year was 1986 - and just to put it in perspective, Chuck Noll was the Steelers head coach, John Stallworth was one year from retirement, and Bubby Brister was a rookie quarterback.

But, unfortunately, unlike the Steelers, the tax code has not had many productive seasons during the past 31 years, and it now requires a serious rebuilding effort. While other countries have modernized their tax codes, the United States has not, although it has continued to increase our tax rates. Today, American businesses suffer from a corporate rate of 39 percent while their foreign counterparts face an average rate of 25 percent.

Why should we care? Because the tax code has a direct impact on economic growth and job creation.

Our corporate tax system encourages the overseas production of goods, which are then imported into the United States. That matters everywhere in the country but especially in Pennsylvania, where more than 16,000 manufacturers employ almost 800,000 workers. Those jobs could be threatened if the tax code is not reformed.

That possibility is even more disturbing because Pennsylvania already is behind the eight ball in job creation. While job growth nationwide has grown at a respectable rate of 7.5 percent since 2012, job growth in the Keystone State has been nearly flat at 0.8 percent. The manufacturing industry in Pennsylvania alone shed about 5,600 jobs between July 2015 and July 2016.

The current tax code also encourages U.S. companies to relocate in order to save on their tax bills. In the past few years, the Cecil-based drug giant Mylan bought a Dutch company and moved its official headquarters to the Netherlands, and medical technology company Medtronic merged with an Irish company and moved its headquarters to Ireland (which has a corporate tax rate of 12.5 percent). Other household names, such as Johnson Controls and Pfizer, have considered similar transactions (called "inversions") to avoid the high taxes levied by the United States. With a number of flagship U.S. companies, such as Kraft Heinz and Alcoa, having a major presence in Western Pennsylvania, the specter of a tax-based business relocation is always present.

The good news is that there is a growing consensus that it is time to fix this broken system. After pledging to develop "historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone," President Donald Trump and his team have outlined a set of tax-reform principles. In the House of Representatives, Speaker Paul Ryan and House Ways & Means Committee Chairman Kevin Brady have released a detailed blueprint, called "A Better Way," and conducted a number of hearings. …

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