The News Journal

February 22, 2015

Three decades -- that's how long it's been since we’ve made serious changes to our tax code. Six billion hours – that’s how much time Americans spend filing their taxes each year.

Thousands of jobs – that’s what Delaware could have lost if Pfizer had ended up buying AstraZeneca last year – a move Pfizer was pursuing due to poorly aligned incentives in our tax code.

It’s no secret our tax code is broken. At 35 percent, we’ve got one of the highest corporate tax rates in the world. That’s compared to an average of 25 percent among other industrialized countries. That makes it harder for us to convince companies to produce goods and invest here in the United States. Look no further than Apple – an American company that sells products to American consumers but conducts much of its business operations overseas – in large part due to our tax code.

We also stack up poorly among other industrialized countries when it comes to the incentives we offer for research and development. Our R&D tax credit isn’t permanent, so companies can’t count on it. That makes it less attractive for companies to set up their research and development and manufacturing facilities here in the U.S. Think of a pharmaceutical company – like we have right here in Delaware – that has to start developing a drug 10 years before it hits the market. Without the certainty of research and development incentives that other countries offer, that company might decide it makes more sense to move its work overseas, using foreign scientists and researchers.

We’re also one of just a few industrialized countries that taxes income earned overseas if companies try to bring that money back to the states. The result is that trillions of dollars in cash that might otherwise be brought back and injected into the U.S. economy is instead going to make foreign economies stronger. This affects companies from Microsoft to General Electric – American companies whose success should benefit American families – not families overseas.

And as anyone who pays their personal income taxes knows, our tax code is complicated, confusing and difficult to navigate. The dread many families feel approaching the April 15 tax deadline is indicative of a flaw in our system.

I spent the past week conducting a Tax Reform Listening Tour throughout our state. I heard from thousands of Delawareans – business owners, individuals, company executives, state officials, and tax preparers – who see these problems firsthand. To solve these problems, Congress needs to tackle comprehensive tax reform.

That means designing a tax system that encourages innovation and entrepreneurship while promoting international competitiveness.

It means a tax policy that supports the resurgence of domestic manufacturing so businesses start making things here in America again.

It means we need to weave fairness, simplicity and progressivity into our tax code. And we need to build a tax system that is stable and predictable – so families and businesses can plan for the future.

In practical terms, for starters, that means getting rid of unnecessary tax breaks for big corporations. Instead, it means focusing credits and deductions on the parts of our economy that help provide good-paying middle class jobs – like domestic manufacturing and the clean energy sector.

It means lowering the corporate tax rate and “repatriating” – or bringing back to the U.S. – American dollars that are currently being invested overseas. I believe once we do that, we should use part of those repatriated dollars to fund roads, bridges and other infrastructure projects. Taxpayers should reap the benefits of bringing this money back home.

Making the U.S. more competitive also means more jobs, a stronger economy and lower deficits.

This week, I met with small-business owners who think the tax code is tilted toward helping big corporations, instead of helping entrepreneurs grow their business and create more jobs.

I met with one Delaware company that wants to do more R&D here in the U.S., but can’t justify it to shareholders because the U.S. tax system can’t compete with that of other countries.

I heard from a woman in Newark who doesn’t understand why – with all the taxes she’s paying – the roads and bridges she drives on are in disrepair.

Tax reform is one of those rare issues in Washington where corporations, middle-class families and entrepreneurs want the same thing – a tax code that is clear, predictable, fair and competitive. The devil is in the details – but I’m convinced a solution is as well. Let’s not add tax reform to the long list of issues held hostage by partisan gridlock. Tax reform is key to unlocking our economy’s potential, and I’m determined to work with my colleagues to do just that. 

John Carney represents Delaware in the U.S. House of Representatives.