A White House-appointed group of business, academic and labor leaders recommended corporate tax reforms and other measures to increase jobs and improve the economy.

During a meeting Tuesday with President Barack Obama, the President’s Council on Jobs and Competitiveness presented a report on strengthening the economy, including recommendations for transitioning to a territorial tax system. The 27-member Jobs Council is chaired by GE chairman and CEO Jeffrey Immelt.

Since its first meeting approximately a year ago, the Jobs Council has issued a series of recommendations to foster growth, competitiveness, innovation and job creation. Of the 35 recommendations the council has made that don’t require legislative action, the White House said that Obama has taken action on 33 and the administration has already implemented 16.

Some of the implemented recommendations include proposing new tax rules that encourage businesses to invest and create jobs in the United States instead of overseas, expediting job-creating infrastructure projects across the country, eliminating inefficient and burdensome federal regulations, and streamlining government.

Obama praised the council for the work they are doing. “I recognize a lot of these issues are difficult,” he said. “They’ve proven challenging for decades. The good news is on each of these fronts we’ve made progress this year. I feel confident in being able to say that every one of the agencies in this government has been focused on how do they improve, get smarter, get better, get faster, become more focused on delivering good value to the end user. And I believe that we’ve made genuine progress on all these fronts. We would not have made this progress without this Jobs Council. “

The Jobs Council released a new report in advance of the meeting detailing recommendations to improve long-term competitiveness by investing in the U.S. education system, building on existing strengths in manufacturing and energy, and reforming the regulatory and corporate tax systems. The year-end report, entitled the “Road Map to Renewal,” also addresses the broader factors influencing American prosperity and competitiveness in a global age.

Noting that as of April 1, when Japan reduces its tax rate, the U.S. will have the highest statutory corporate income tax rate among the 34 developed countries in the Organization for Economic Cooperation and Development. The report recommends lowering the U.S. corporate tax rate and broadening the base. The report noted that despite the high rate in the U.S., the corporate tax raises relatively little revenue, because the U.S. Tax Code has numerous special deductions, credits, exclusions and loopholes.

“At the same time, our worldwide system of corporate taxation discourages companies from investing their foreign earnings in the U.S.,” said the report. “The result is an outdated and extremely inefficient system that creates economic distortions and puts U.S. businesses and workers at a disadvantage.”

The report noted that there is a growing bipartisan consensus that the country needs comprehensive reform of the corporate income tax. The Jobs Council supports measures to create a simpler, more efficient tax system to level the playing field for businesses and makes the U.S. more competitive internationally, according to the report.

In the report, the council recommends moving from a corporate tax system with a high rate and a narrow tax base to one with a broader base and a lower tax rate. “This would not only enhance economic efficiency but encourage more investment in the U.S. by foreign and domestic companies, boosting economic growth as well as employment,” said the report. “In a global economy in which capital can move easily across borders, differences in corporate tax rates have a growing influence on where multinational companies decide to invest. Yet while most of our competition has reduced their rates significantly over the past three decades, corporate income taxes in the U.S. have changed very little. Broadening the tax base would simplify the Tax Code and enable the U.S. to lower the corporate income tax rate to internationally-competitive levels.”

The report also recommends transitioning to a territorial system of corporate taxation.

“Many Council members agree that the U.S. should shift to a territorial system of taxation in order to make America more competitive in global markets,” said the report. “While most other developed nations have adopted territorial systems that exempt most or all foreign income from taxes when they are repatriated, the U.S. subjects all worldwide earnings to the corporate income tax when they are brought home to the U.S. This approach actually encourages U.S. companies to keep their earnings abroad rather than investing them here at home. Adopting a territorial tax system would bring us in line with our trading partners and would eliminate the so-called ‘lock-out’ effect in the current worldwide system of taxation that discourages repatriation and investment of the foreign earnings of American companies in the U.S.”

However, the report acknowledged that some members of the Jobs Council disagree with this point of view. “They believe that, if the U.S. adopts a territorial system of taxation, it is imperative that it is designed in a way that prevents U.S. firms from exploiting U.S. markets while avoiding U.S. tax,” said the report. “They believe the U.S. corporate tax system must be designed to prevent such behavior.”
The Jobs Council also urged Congress and the Obama administration to begin work on tax reform immediately. “Leadership of both parties in the House and the Senate should make a public commitment to getting reform done and they should begin the process now,” said the report.

The corporate income tax might not be the only subject of tax reform efforts. The report also acknowledged that approximately half of business income is now accrued through “pass-through” entities like S corporations and partnerships, which are excluded from the corporate tax. Due to its complexity and the incentives for tax avoidance, the U.S. corporate tax system results in high administrative and compliance costs of over $40 billion a year, which businesses could be using to invest and hire. “A growing body of research also shows that in a world of mobile capital, workers bear a rising share of the burden of the corporate income tax in the form of reduced employment opportunities and lower wages,” said the report.

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