Higher Taxes Will Damage America’s Ability to Compete

For more than a century Congress has recognized the importance of keeping American companies competitive in the global marketplace, understanding that their success and growth abroad increases prosperity and creates jobs here at home.

To level the playing field, Congress enacted a series of complex tax rules designed to prevent double taxation and allow American companies to compete on an equal footing with their foreign competitors.

The Obama administration now wants to change the international tax rules in a way that will give foreign competitors an unfair advantage over U.S. companies in the global marketplace, allowing the foreign companies to reinvest more, expand faster, and sell products at lower prices. The administration claims it is protecting Americans against companies that export jobs; in reality, the proposal would put the U.S. increasingly out of sync with the rest of the world.

No one likes the idea that jobs may be sent overseas. But that's not what's going on. In fact it's just the opposite.

Business Roundtable, an association of chief executive officers of leading U.S. companies with more than $5 trillion in annual revenue and nearly 10 million employees, recently released a study showing that as the overseas operations of U.S. corporations grow (about 2,200 U.S. corporations have overseas businesses), jobs and work are created here at home.

These jobs employ 22 million men and women, roughly 19 percent of the American work force, and these employees earn about 25 percent more than other American workers. These same companies contribute about $2.5 trillion annually to the U.S. gross domestic product, and they account for roughly 50 percent of U.S. exports.

Virginia's 795 worldwide American companies are responsible for more than 50 percent of all private-sector employment in the state. These companies and their suppliers provide nearly 2 million high-paying jobs and are responsible for producing $198 billion in Virginia's gross domestic product (GDP) and providing $107.5 billion in payroll to Virginia's workers. Their continued success and prosperity are inextricably linked to the growth of our economy and the creation of jobs in Virginia.

Worldwide American companies, including MeadWestvaco and Brink's, located here in the Richmond area, are doing what any smart business does -- they are following the market. After all, 95 percent of the world's consumers live outside the United States. U.S. corporations for the most part set up overseas operations in high-income countries. And, 90 percent of what those U.S. foreign operations make abroad, stays abroad and is consumed abroad.

Despite these overseas operations, our member companies agree that the heart and soul of these companies remain in the United States. Roughly 79 percent of their employees are here; 87 percent of their research and development is done here, and 74 percent of their capital investment is here.

The administration's proposals, however, threaten to inhibit economic growth and slow job creation here at home.

Among the world's leading industrial countries only one -- Japan -- has a higher corporate tax rate than America. Japan, unlike the United States however, does not tax the worldwide income of Japan-based corporations. Those companies pay taxes only in the countries where the income is earned.

The U.S., by contrast, expects its overseas companies to pay taxes in a country -- say, Germany -- where the income is earned and to pay an additional tax in the United States. This puts American companies at a significant disadvantage. If worldwide American companies are hit with a big tax hike, as the administration proposes, it will undoubtedly impact job security for the millions of U.S. workers who support their companies' overseas operations.

Higher taxes will also stifle future job growth -- and job creation is a necessity in turning around our economy.

So, the question is, do we want to further price U.S. corporations out of global competition and diminish rather than increase the jobs that they create here -- or do we want to have a level playing field so we can grow our economy and increase employment here at home?

The fact is, U.S. corporations already face an uphill battle because our tax code is out of step with those of our competitors abroad. To restore growth and job creation, the United States must have a competitive tax system that puts its major employers -- America's worldwide companies -- on equal footing with the rest of the world.

John Castellani is president of Business Roundtable. Contact him at .