Mr. President, I rise to speak about a bill I am introducing today, the United States Job Creation and International Tax Reform Act of 2012. The name says it all. This is a bill that would…
Mr. President, I rise to speak about a bill I am introducing today, the United States Job Creation and International Tax Reform Act of 2012. The name says it all. This is a bill that would incentivize American companies to create jobs in the United States while at the same time leveling the playing field for U.S. companies in the global marketplace. This bill would reform and modernize the rules for taxing the global operations of American companies and would help America become a more attractive location to base a business that serves customers all over the world.
Unfortunately, our current tax rules do just the opposite. In fact, many businesses could be better off if they were headquartered outside the United States. That is not right, and Congress should fix it. This bill would do that.
I wish to thank Senator Hatch and members of his staff who have been helpful in working through the complexities of this international tax.
I also wish to mention Eric Oman, a member of my staff and a CPA, who worked with me in developing this legislation. He has lived overseas and worked with the U.S. tax laws overseas. That is the kind of expertise we need to reform international tax law.
I wish to thank all who testified before the Finance Committee, especially Scott Naatjes, who is the vice president and general tax counsel of Cargill. This man has dealt with the complex accounting of foreign earnings and the money to be repatriated to the United States, an actual practitioner whom we relied on. He gave us insight into years of records that have to be reviewed for a single item in the complex web of the current international tax system in order to bring the money back to the United States.
Finally, I wish to thank Dave Camp, the chairman of the House, Ways, and Means Committee, who kick-started the discussion on tax reform when he released his discussion draft last October.
Enacted in the 1960s, our current international tax rules have passed their expiration date. Many of the U.S. major trading partners, including Canada, Japan, the United Kingdom, and most of Europe have moved to what are called territorial tax systems. That is actually a word for a global tax system. These types of tax systems tax the income generated within their borders and exempt foreign earnings from tax.
The United States, on the other hand, taxes the worldwide income of U.S. companies and provides deferral of the U.S. tax until the foreign earnings are brought home. Deferral of the tax until the earnings are brought home encourages them not to bring the money home. It actually incentivizes them to leave their money abroad and to expand over there. Because the United States has nearly the highest corporate tax rate in the world, companies don't bring those earnings back and, as I said, reinvest outside the United States. That certainly is not a recipe for U.S. growth and U.S. job creation.
The dominance of U.S.-headquartered companies in the global marketplace is waning. Thirty-six percent of the Fortune Global 500 companies were headquartered in the United States in 2000. In 2009, that number dropped to 28 percent. That is from 36 percent to 28 percent among the Fortune Global 500 companies headquartered in the United States. Clearly, America is losing ground and our current international tax rules are a big part of the problem.
The bill I am introducing would help to right the ship by pulling our international tax rules into the 21st century so U.S. companies are not at a competitive disadvantage with foreign companies because of American tax rules that are outdated by changes most other countries have already made. The bill would give U.S. companies incentives to create jobs in the United States and undertake activities in the United States in order to win globally.
First, if the foreign earnings have already been subject to a tax in a foreign country, this bill would provide a 95-percent exemption from the U.S. tax on those foreign earnings. This would allow for American- managed capital to be put to the most productive use and help stabilize our economy.
Second, this bill would allow foreign earnings that are currently sitting overseas to be brought back to America at a reduced rate--not a zero tax rate but a greatly reduced rate--and with the ability to pay that, the taxes that are owed in installments. That gets the cash back now and still gets some taxation for us instead of leaving it all overseas. This provision would serve as a transition to the new territorial system by allowing U.S. companies to unlock a significant amount of capital currently being held offshore and quickly move into the new territorial system, and that means more jobs and a better economy. It also emphasizes one of the things I talk about with any of the tax changes--as one of the few accountants--we have to transition into these things if we want the companies stable enough that they can exist through the change in the Tax Code, and that provides for a transition as well.
Third, this bill would reduce the U.S. tax burden on income generated by American companies from ideas and innovations. This bill would encourage companies to develop and keep rights to ideas and inventions in the United States. When families tune in to ``60 Minutes'' on Sunday evenings, they would hear fewer stories about how U.S. companies are moving their profits to tax haven countries and avoiding U.S. tax on those earnings. Families would hear fewer stories about how the U.S. multinational companies set up post office boxes in the Cayman Islands and Switzerland without a single employee or officer of the company anywhere on site and attribute a significant portion of their foreign earnings to those jurisdictions.
Instead, families would hear more stories about how U.S. companies are generating the ideas and inventions of tomorrow right here in America.
This bill can be a first step in tax reform. We have a lot of work to do in many other areas of tax law in order to make it simpler, fairer, and more transparent. We need to be looking at the individual tax system, the corporate tax system, and particularly how we tax the passthrough entities such as partnerships and S corporations that have to pay the tax on the money when it is still invested in the business.
I also recognize, as we move forward in these other areas, it may be appropriate to make changes to this bill. This is exactly how the legislative process should work, and I look forward to getting back to conducting the Senate's business in regular order, where we work through the issues in the committee first and offer amendments to improve the bills that ultimately come to the Senate floor, where there is a shot for everybody else to make amendments.
But today with the introduction of this bill, we move from discussion to action with respect to a single piece of the tax reform. The Simpson-Bowles deficit commission recommended a move to a territorial system, and I am glad to be moving the conversation forward on this recommendation with the introduction of this bill. I hope this bill will begin a discussion, a discussion of fairness that needs to begin yesterday.
I hope Members and their staff will review the bill and the detailed explanation we have prepared. I also ask that all interested stakeholders review the bill and reach out to my staff and the staff of the Finance Committee to discuss what they like, what they don't like, and their suggestions for improvements. That is the way bills are supposed to work.
The international tax rules are not easy or simple and reforming them will be a heavy lift. But those things are worth doing, and when they are worth doing, they are rarely easy or simple.
I look forward to joining with my colleagues to pass international tax reforms that our American companies and our country desperately need.
Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.
