–Draft Would Reduce Corp. Tax Rate To 25%
–Exempt 95% of Overseas Earnings From US Taxation When Repartriated

WASHINGTON (MNI) – The following is the text of a statement
released by the House Ways and Means Chairman Dave Camp Wednesday:

Today, Ways and Means Committee Chairman Dave Camp (R-MI) unveiled
an international tax reform discussion draft as part of the Committee’s
broader effort on comprehensive tax reform that would lower top tax
rates for both individuals and employers to 25 percent. In addition to
rate cuts, the plan would transition the United States from a worldwide
system of taxation to a territorial system – a move virtually every one
of America’s global competitors has already made.

Camp unveiled the draft legislative language with a specific
request – that employers, academics, practitioners and workers provide
comment and add their voices to the legislative process.

Commenting on the release of the proposal as a part of his overall
approach to comprehensive tax reform, Camp stated, “Instead of having
laws on the books that encourage hiring U.S. workers, our outdated
international tax system encourages employers to keep profits and jobs
outside of America. If we are serious about creating a climate for job
creation, now is the time to adopt tax policies that empower American
companies to become more competitive and make the United States a more
attractive place to invest and create the jobs this country needs.”

The Ways and Means discussion draft would:

– Reduce the corporate tax rate to 25 percent – bringing it in line
with the average of countries in the Organization for Economic
Cooperation and Development (OECD). The Committee continues to examine
base broadening measures that will replace the revenue foregone by
reducing the corporate tax rate, so these measures are reserved in the
discussion draft for future release.

– Shift from a worldwide system of taxation to a territorial-based
system. The new plan:

* Exempts 95 percent of overseas earnings from U.S. taxation when
profits are brought back to the United States from a foreign subsidiary.

* Includes anti-abuse rules to ensure companies do not avoid paying
their fair share of U.S. taxes.

* Frees up existing overseas earnings to be reinvested in America
after they are taxed at a low rate in line with current repatriation
proposals.

* Makes American companies more competitive on the global stage
with little or no impact on the federal deficit.

In advocating the need for international tax reform, Camp cited
several reasons why current U.S. tax policies are putting American
employers and workers at a competitive disadvantage:

– America will soon have the highest corporate tax rates in the
industrialized world: Only Japan has a higher corporate tax rate than
America, which has a combined federal-state rate of 39.2 percent – and
Japan has already indicated its intent to lower its rate.

– Our “worldwide” system of taxation is a remnant from the Cold
War: While it has been 25 years since Congress reformed the tax code,
it has been almost 50 years since it undertook a bottom-up review of our
international tax laws. In other words, our international tax rules
were written when the United States accounted for 50 percent of the
global economy and had no serious competition from others.

– American employers face double taxation compared to their foreign
competitors: As a result of our “worldwide” system of taxation, when
U.S.-based companies try to bring profits back home, they must pay U.S.
taxes on top of the tax they already pay in the foreign market U.S. tax
laws encourage investing in a foreign country instead of bringing
profits back home: Because U.S.-based employers face additional taxes
if they bring their overseas earnings back to invest in the United
States, it is cheaper for these companies to reinvest profits overseas
instead of creating jobs here.

– America is losing ground: In 1960, U.S.-headquartered companies
comprised 17 of the world’s largest 20 companies – that’s 85 percent.
By 2010, just six – or a mere 30 percent – U.S.-headquartered companies
ranked among the top 20.

– Our foreign competitors are actively reforming their tax laws:
Other countries are actively reforming their international tax codes –
giving employers lower rates and moving towards a territorial tax
system. Countries like the United Kingdom, Canada, and Germany, have
recently lowered their tax rates to spur job creation and economic
growth. Yet, America is sitting on the sidelines doing nothing. The
United States cannot sit back and watch jobs go overseas because the tax
code provides such perverse incentives.

** Market News International Washington Bureau: 202-371-2121 **

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