In 1986, the United States changed the tax code to lower the corporate rate and make us more competitive. Since then, America has done nothing, while other countries such as Ireland, Germany, the UK and Japan all dramatically lowered their rates and did away with their repatriation tax. There are now plans to lower the corporate rate in both France and the Netherlands. This raises the stakes even higher for the United States.
As the global economy grows ever more interconnected, more and more of U.S. corporate profits are earned abroad. With other countries lowering their corporate rates and ending their repatriation tax, it is easy to see why American companies are targets on the global acquisitions market. Look at the last decade.
Since 2004, American companies lost more than $500 billion combined on the global acquisitions market. In fact, according to the Business Roundtable, American companies were the target for mergers and acquisitions 31 percent of the time, while they were the acquirer 16 percent of the time. If our corporate tax rate had been 20 percent, it is estimated that 3,200 companies would have stayed in America during that time.
I have lived in Asia and Europe, and have worked on every continent except Antarctica. Four decades of business experience has proven, time and time again, that America has the best workforce in the world. Our workforce is unique, innovative, self-starting and — regardless of obstacles — it gets the job done. However, today’s corporate tax structure is penalizing our workers. We have to reduce the tax burden before it cripples our workforce even further.
If we change the business tax code by lowering the corporate tax rate and eliminating the repatriation tax, there will be renewed investment in our economy. This change will create jobs, increase wages, boost workforce development and grow the economy. The policy non-profit Tax Foundation has projected that all of these changes, which are included in the current United States Senate plan, would create nearly 1 million new jobs.
The United States is on the cusp of an economic turnaround. Consumer confidence is at a 16-year high and manufacturer optimism is at a 20-year high. There is an expectation being priced into the bond and stock markets that something will happen on tax this year, and it’s imperative that Congress act accordingly. Changing the tax code by Christmas is the single greatest thing we can do to ignite economic growth next year.
This sense of urgency is sorely missing in Congress. In the real world, you have to get things done as fast — or faster — than your competitors. As a former Fortune 500 CEO, I competed with other major companies like Nike and Walmart. In the business world, you don’t think about things theoretically, you act instinctively.
Countries around the world have already lowered their corporate rates. Now the United States is playing catch up and we cannot wait any longer to deliver results. We need to change the tax code to grow the economy, put people back to work, increase wages, and over the long-term, help reduce the national debt. Otherwise we will continue to be outpaced by our competitors and American workers will pay the ultimate price.
Senator David Perdue is the junior Republican Senator for the state of Georgia. He is the only Fortune 500 CEO in Congress, serving as the CEO of companies like Reebok and Dollar General.