to be an efficient and worthwhile investment in our nation’s future. This includes
, but is not limited to, incentivesto hire disadvantaged workers, invest in distressed communities, bring jobs home from overseas, help smallbusinesses and promote clean energy and energy efficiency.Further, we must eliminate tax loopholes that encourage reckless and undesirable behavior such as the overuse of debt financing and tax sheltering, and explore commonsense revenue streams like putting a price on carbonpollution or enacting a small financial transactions tax to reduce market volatility. We should also repeal the morethan $95 billion in special tax breaks we are scheduled to give away to the established, highly profitable fossil fuelindustry over the next ten years.
A Global System that Works for the American People
In addressing our serious revenue gap, we should reduce
the tax code’s bias towards overseas
investment. Rather than fixate on top marginal rates, c
orporate tax reform should focus on what’s actually broken:
our partial-worldwide system relying on deferral has not kept pace with the globalized business community. Thestatus quo allows multinational corporations to achieve extremely low worldwide and domestic effective tax rates,encourages shifting of profits and investment overseas, and costs billions each year in US tax revenues. Toharmonize 21
century commerce with our revenue needs, we should modernize our tax code by either ending deferral (and the excessive tax avoidance this encourages) or adopting a global minimum tax (rendering deferrallargely irrelevant). Yet some large corporate interests have marched to Capitol Hill advocating for a tax system that would
tax code’s bias towards foreign
profits and investment, and
the deficit. They claim that the only way for theUnited States to remain globally competitive is to transition to a territorial tax system, which would levy taxes only on earnings in the country in which they are reported
and exempt corporations’ offshore profits from US taxes
. Their solution is wrong and ignores some very hard facts.Such a system would
the incentives and opportunities for multinationals to shift profits and investmentoffshore. While that might be good for corporate shareholders, it would not be good for America's workers. Thenon-partisan Congressional Research ServicetoldCongress last year that a territorial system
“would make foreign
investment more attractive
causing investment to flow abroad and reducing wages for US workers.Regardless of rumor or political agenda, the United States remains the preeminent location for businesses in theglobal economy. According to the World Bank, the United States ranks first among large countries in the ease of doing business, which included more comprehensive measures of business-friendliness including regulation burden,property rights, access to credit, and contract enforcement, to name a few. There is no need to cater to thedemands or large corporations, particularly when it would devastatingly undercut the investments we need to makein our infrastructure and human capital.
Individual Tax Reform Principles1.
Restore and Improve Progressivity
It is a bedrock principle of fairness that those with higher incomes should pay progressively higher tax rates. Any tax reform must ensure that each fifth of the income distribution (as well as the top 1% and top 0.1%) should havea higher average effective tax rate than the income group below. Across the board tax rate cuts are regressivebecause a 20% tax cut for a millionaire
even as a share of income
amounts to a far greater benefit than a 20%cut for a hardworking low income American. To maintain or strengthen progressivity, we should end one of the leading contributors to after-tax incomeinequality in this country, the special tax breaks for investment income. Workers who get their salaries from wagesoften pay a higher effective tax rate than wealthy individuals like Mitt Romney and Warren Buffett who make mostof their income from selling stocks and bonds or from dividends. This undermines the basic tenant that average taxrates should rise with income. In fact, the richest 1% of taxpayers receives 71% of all capital gains, while thebottom 80% of taxpayers receives only 10% of capital gains. We should treat all capital gains and qualifieddividends as ordinary income, an approach President Reagan once signed into law.