In 1986 – Tom Cruise cemented his Hollywood star status in the blockbuster film Top Gun and on the small screen Americans were obsessed with television dramas Dynasty and Magnum P.I. It’s also the last time the U.S. unveiled major tax reform.
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“We are now 29 years away from the last tax reform, you need to reform the taxes every generation,” lamented Skybridge Capital Founder Anthony Scaramucci during a Monday appearance on FOX Business Network’s Mornings with Maria. Since then lobbyists and members of Congress have ballooned tax policy to around 760,000 pages said Scaramucci, adding, “that is a disaster.”
Within the tax code, the U.S. has the highest corporate tax rate, 39%, among developed industrial nations making it less competitive against other countries, according to data tracked by the Business Roundtable. On average the U.S. tax rate is 60% higher than the nation’s toughest rivals. Matthew Miller, who oversees the Business Roundtable’s Fiscal Policy Committee, told FOXBusiness.com, “Foreign countries are competing harder than ever for business investment and jobs.” The United Kingdom, which has a 20% tax rate, has made a push in recent years to beef up its London financial hub. While some U.S. CEOs are being proactive, pursuing plans to relocate headquarters oversees. Pfizer (PFE) has confirmed it is in talks with Allergan (ACT), a deal that could potentially shift its headquarters to Dublin, Ireland where the tax rate is just 12.5%.
Rather than get dinged nearly 40%, CEOs from the nation’s biggest companies have $2.1 trillion in cash socked away overseas, according to a report from the Center for Tax Justice and the U.S. Public Interest Research Group Education Fund released last month. For example, reports suggest Apple (AAPL) has as much as 90 percent of the tech giant’s $200 billion in cash stashed offshore and during an interview last month on the FOX Business Network, Cisco (CSCO) CEO Chuck Robbins confirmed most of the tech giant’s $60 billion in cash sits overseas.
Refreshing the arcane tax code is a top priority for the leading GOP contenders. During the FOX Business Network/Wall Street Journal televised debate Tuesday Jeb Bush touted his plan, saying it will help level the playing field with China. “A corporate rate of 20 percent which puts us 5 percent below that of China. And allows us full..full expensing of investing. It would create an explosion of investment back into this country creating higher wage jobs," he said.
Rival Billionaire Donald Trump’s plan is more aggressive which proposes the corporate tax rate be lowered to 10 percent. Trump slammed both parties for not being able to lower the tax rate even though they agree its hampering economic growth. "They [CEOs] are leaving the U.S. to go to other countries," he warned. "Democrats and Republicans both agree, its the only thing I can think of, they both agree, let the money come back in and 3 1/2 years and they still can’t make a deal," Trump said adding, "all of that money could come right in and be used to rebuild our country."
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Although revamping the tax code will likely fall to the next U.S. president, progress is already underway, said Cisco’s Robbins. “We are optimistic right now because there is a great deal of work going on in Washington,” he said. Last month Robbins credited Rep. Paul Ryan (R-Wis.) with leading the charge. Ryan has since become Speaker of the House.
Reforming tax policy is no easy task, admits Miller. “The challenge is tax reform is just hard.” But he agrees progress is being made in Washington D.C. Opening a dialogue is the first step to putting the U.S. back on track to sustainable economic growth and toward helping the U.S. compete with rival nations who want to attract U.S. corporate dollars.