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Rep. Camp yesterday proposed an overhaul of the U.S. corporate tax code that would bring it in line with tax competitiveness in the rest of the world.
The House’s top tax writer proposed Wednesday exempting from taxes 95 percent of the profits that American companies earn overseas.
House Ways and Means Committee Chairman David Camp, R-Mich., said he would tax the remaining profits at just 5 percent. That is well below the current top corporate tax rate of 35 percent that applies when companies bring their profits back home, making his proposal a major victory for U.S.-based multinational firms.
The U.S. is one of very few countries that taxes corporate earnings at the full rate as they would be taxed at home. In an editorial in The Wall Street Journal, business leaders John Chambers and Safra Catz noted last year that the U.S. corporate tax system incentivizes keeping money overseas.
The U.S. government’s treatment of repatriated foreign earnings stands in marked contrast to the tax practices of almost every major developed economy, including Germany, Japan, the United Kingdom, France, Spain, Italy, Russia, Australia and Canada, to name a few. Companies headquartered in any of these countries can repatriate foreign earnings to their home countries at a tax rate of 0%-2%. That’s because those countries realize that choking off foreign capital from their economies is decidedly against their national interests.
The U.S. corporate tax code is needlessly complicated and imposes an inordinately high statutory rate, especially compared with other developed nations. Reform is needed, and luckily, Dave Camp seems ready to take on the problem.