(WASHINGTON) - In response to President Obama's corporate tax reform framework announced today, ITIF president Rob Atkinson made the following comment:
"It is a no-brainer that we need to overhaul corporate taxes. It is unfathomable that the United States has the second highest statutory and among the highest effective corporate tax rate in the world (even if the administration data suggest that our effective tax rate is on par with other nations). So the Obama Administration deserves credit for taking this on.
However, the Administration's proposal has too much of "robbing Peter to pay Paul" and holds back on real reform in the name of fiscal austerity. "Not adding a dime to the deficit" might win votes but it won't fix a fundamentally uncompetitive U.S. corporate tax code. In fact, we need to add more than a dime to the deficit if we truly want to lower the tax burden on the companies, especially those creating the products and jobs of the future and competing in international markets.
For example, while expanding and making permanent the R&D tax credit is critical for innovation-based competitiveness, the Administration needs go further and propose raising the credit to 20 percent, not 17 percent. The Administration would do well to also follow the lead of many of our competitors and introduce a "patent box" that taxes income from innovation at a lower rate.
The Administration touts the benefits of simplicity and a tax code that does not "distort" investment decisions. But not all distortions are anti-growth, many, such as the R&D credit and accelerated depreciation, are growth enhancing. And so is the domestic production deduction, which the administration proposes expanding, even though it distorts "choices such as where to produce [and], what to invest in."<