Washington, DC – Today, Chairman Dave Camp delivered remarks at the U.S. Chamber of Commerce, below are excerpts followed by the full remarks.
The Challenges We Face
“Today, we face some historic challenges. The national unemployment rate has not been this high for this long since the Great Depression. Despite this fact, the President – at virtually every turn – argues for higher taxes on small businesses, investors, corporations, and even on families. His Administration is deaf to employers when it comes to complaints about regulations new and old. Frankly, I am baffled by the President’s seeming hostility to entrepreneurs, to employers and to the economic innovation this country needs now more than ever.”
Our Current Tax Code is a Burden on Businesses
“The challenges created by the tax code – for job creators and families – are rooted in a similar place. The tax code is too complex, too costly, and takes too much time to comply with. Whether it is the compliance and administrative burdens or the impact of temporary and expiring tax provisions, today’s tax code is hampering the ability of businesses to plan their finances with reasonable certainty. If they can’t plan, they can’t invest. If they can’t invest, they can’t grow. And, if they can’t grow, they can’t do what we need them to do most – hire.”
We Must Act Now on Our Long-Pending, Job-Creating Trade Agreements
“With the unemployment rate at 9.2 percent, I would expect the Administration to be rushing to send up, support and implement these agreements. Instead, by holding them up, the President has given the Europeans and the Canadians a head start in these critical and strategic markets”
“I believe we have negotiated a good TAA package, one that can and should stand on its own. Last week, 12 Senate Republicans vowed to vote for cloture on that package and set a clear path forward for consideration of the trade agreements and TAA in the Senate. The Speaker has already promised that he would put the TAA bill on the floor. What more does the President need?”
Good morning, and thank you for having me here today.
My dad was a small businessman, and I can remember my first job was working in his garage. I remember the responsibility he felt for his employees and their families. I saw firsthand the stress of having to meet a payroll week after week. I will never forget it, much like I will never forget seeing how much was taken out of my paycheck for taxes. But that is where my respect for all of you started – you are the people who take risks and shoulder the responsibility of keeping America working, innovating and leading. So, let me begin by thanking you for representing the businesses – especially small businesses – of America.
Today, we face some historic challenges. The national unemployment rate has not been this high for this long since the Great Depression. Despite this fact, the President – at virtually every turn – argues for higher taxes on small businesses, investors, corporations, and even on families. His Administration is deaf to employers when it comes to complaints about regulations new and old. Frankly, I am baffled by the President’s seeming hostility to entrepreneurs, to employers and to the economic innovation this country needs now more than ever.
It will take real leadership to turn this nation around and get our economy back on track – leadership we have yet to see from this Administration. While the markets and the media are fixated on the debt limit debate, which certainly could have an impact on our economy, I want to focus today on two other issues that must be dealt with – and the President still has a chance to engage on – that will get American working again: tax reform and trade agreements.
Since the Tax Reform Act of 1986 – the last comprehensive tax reform enacted by Congress – the U.S. tax code has become a maze of increasingly complex credits, deductions, exclusions and exemptions.
The challenges created by the tax code – for job creators and families – are rooted in a similar place. The tax code is too complex, too costly, and takes too much time to comply with. Whether it is the compliance and administrative burdens or the impact of temporary and expiring tax provisions, today’s tax code is hampering the ability of businesses to plan their finances with reasonable certainty. If they can’t plan, they can’t invest. If they can’t invest, they can’t grow. And, if they can’t grow, they can’t do what we need them to do most – hire.
Twenty-five years is too long a time to go without updating the tax code. Amazingly, it’s been almost 50 years since we undertook a comprehensive review of our international tax laws. In those five decades, the global marketplace has changed dramatically.
So too has America’s role in that marketplace. To illustrate the intersection between America’s tax environment and the global landscape, consider this single data point. In 1960, the largest worldwide companies were nearly all American companies. American-headquartered companies comprised 17 of the world’s largest 20 companies – that’s 85 percent. By 1985, there were only 13, and by 2010, just six.
There are many reasons for this trend, and certainly some of that has to do with the emergence of other strong economies around the world. But without a doubt, a common complaint that we hear from American companies trying to compete abroad is that our tax code, with its complexity and its high corporate rate, acts as a hindrance. The tax code’s antiquated features have diminished the attractiveness of the U.S. as the premier country in which to locate a business.
America’s combined federal-state corporate tax rate of 39.2 percent is only outpaced by Japan’s rate of 39.5 percent – and Japan has already indicated its intent to lower its rate. Such action will leave America with the highest corporate tax rate in the world – 50 percent higher than the 26-percent average rate for OECD countries.
As if that were not enough, the U.S. is one of the last major economies to operate a worldwide tax system for active business income, which many believe is a further barrier to the growth of American companies.
Capital will find its way to the most profitable opportunities around the world. But when U.S. companies must pay an additional U.S. tax on top of the tax they pay in the foreign market, then that capital is more likely to be invested through foreign companies who do not face this additional tax. As a consequence, American workers lose out on the jobs that would have been created to support those opportunities.
Simply put, our international tax laws were largely put in place at the beginning of the Cold War, when the United States accounted for 50 percent of the world’s GDP. They may have made sense then, but today, those same laws are causing America to lag further and further behind.
Ensuring long-term prosperity in the face of increasing global competition requires Congress to re-examine the tax code. As we pursue comprehensive tax reform, I intend to develop solutions that empower American companies to become more competitive and make the U.S. a more attractive place to invest and create the jobs this country needs.
Here are my goal posts for comprehensive tax reform:
First, we don’t raise taxes. In our nation’s recent history, federal revenues have equaled or exceeded 20 percent of GDP only three times – the last two years of World War II and in 2000 (which was spurred by a temporary and three-fold increase in capital gains revenues associated with the tech bubble).
It might seem like circular reasoning, but tax reform should reform taxes. It shouldn’t be used to raise taxes.
Second, we must achieve simplicity and fairness. The tax code should not pick winners and losers. It should not be a tool of industrial policy. We must close tax loopholes and reduce the number of expenditures, credits, deductions and exemptions that bestow preferential treatment on various groups and activities. When the American people read stories about major corporations paying little or no tax, they rightly wonder about the fairness of the code. The American people should not have to question the fairness with which their government taxes them.
Third, above all else, the code must be conducive to growth and job creation. As I said, we will soon have the highest corporate tax rate in the world, and our worldwide system of taxation is as outdated as it is uncompetitive. Tax reform should encourage economic growth and job creation, not hinder it. As we showed in the House Republican Budget, combined with fiscal restraint, tax reform can help employers create up to 1 million jobs next year alone.
If we enact comprehensive tax reform that has all of these components, we will set the stage for strong, sustainable economic growth in the short term and the long run. If families and employers are unimpeded by a cumbersome and excessively complex tax code, not only will we earn the trust of the American people, we will help restore the hope and promise of the American Dream.
Without a doubt, this effort will require a lot of hard work to achieve a bipartisan consensus, and I’m encouraged by the progress we are making at this early stage.
Earlier this year, Members of the Joint Committee on Taxation had a very positive bipartisan conversation with two of the key architects of the Tax Reform Act of 1986: Secretary James Baker and Congressman Dick Gephardt. More recently, Senator Baucus and I convened a joint hearing between the Senate Finance Committee and the House Ways and Means Committee – the first such meeting between our two committees to discuss tax policy in 71 years. As Charlie Rangel noted, even he wasn’t there for that one.
So, despite the debate over the debt limit, I am encouraged about the bipartisanship and progress that has been made in the area of tax reform. We will need more of it to see it across the finish line, just as we must now re-double our efforts to see the three long-pending, job-creating trade agreements across the finish line.
I know many of us are less than pleased with where we are at on the trade deals and trade adjustment assistance. But just for a moment I want you all to think back to a year ago – or even six months ago. I bet not one of us thought the trade deals would get done.
Under the Democrats’ control, Ways and Means did not hold a single hearing on our pending trade agreements since they were signed four years ago – not Colombia, not Panama and not South Korea. In the first few weeks of this year – and before many committees had even organized – I held the first of a series of hearings on the opportunities presented by the pending trade agreements. We’ve been on a very positive path since that hearing, and today, victory is in sight. But we are, at the same time, the most vulnerable we’ve ever been to seeing these opportunities simply never materialize.
As many of you know, because you’re worked with us to advance these agreements, they have the potential to add over $10 billion to our economy and will reinforce critical strategic partnerships. According to the President’s own measure, these agreements will boost economic activity enough to create up to 250,000 new American jobs.
With the unemployment rate at 9.2 percent, I would expect the Administration to be rushing to send up, support and implement these agreements. Instead, by holding them up, the President has given the Europeans and the Canadians a head start in these critical and strategic markets.
We are already losing ground to our foreign competitors. Reports show that EU exports to South Korea are already up nearly 20 percent in the handful of weeks since that agreement entered into force. Those are contracts and relationships our workers and employers should have had a shot at. Washington must act and act now; we cannot afford to let these trade agreements languish any longer.
I think that we can overcome the usual anti-trade rhetoric and pass these agreements with a strong, bipartisan vote. That is – in many ways – the easy part. Before we get to debating the merits of the agreement, we have to overcome a threshold stumbling block, which is the President’s constantly shifting demands on Trade Adjustment Assistance. We have attempted to meet those demands. We have done our work, and we are ready, but the President is not.
I believe we have negotiated a good TAA package, one that can and should stand on its own. Last week, 12 Senate Republicans vowed to vote for cloture on that package and set a clear path forward for consideration of the trade agreements and TAA in the Senate. The Speaker has already promised that he would put the TAA bill on the floor. What more does the President need?
The time for talk on trade – and more importantly the talk about the jobs they will create – is over. For the sake of the 14 million unemployed workers in this country, the President should send up the trade agreements now. If he does so, I will and the House will act on the trade agreements and TAA immediately.
Before I conclude, I want to close with a few words about China – a country that while representing our largest export opportunities, is also a country that flagrantly disregards its international obligations and seeks to impede fair commerce at every opportunity. China blatantly steals the intellectual property of American businesses and grossly subsidizes domestic industries – and its list of trade abuses goes on and on.
Yet, some in Congress want to talk only about currency manipulation. That is a mistake and misses the far larger issues we have with China.
While successfully implementing the South Korea agreement would provide us with a critical counterbalance in the region, part of our China strategy must include resumption of our bilateral investment treaty negotiations. Again, the Administration’s lack of action here is as confusing as it is damaging to the interest of U.S. businesses and their workers. Again we are sitting on the sidelines while our trading partners are aggressively moving forward – many of which have already signed investment agreements with China that give their investors more rights in China than U.S. investors have. The EU recently announced that it will negotiate its own investment agreement with China. But the Administration has been unable to form its negotiating position because it can’t decide how to treat labor issues. Once again, a special interest is allowed to hamstring our ability to create jobs.
After Congress recesses for August, I intend to have the Ways and Means Committee begin looking more aggressively at China’s abuses.
Given the hurdles I’ve just laid out, some of you may think I should be discouraged. I’m not. Each of these areas – Colombia, Panama, South Korea, China, tax reform – all represent an opportunity for this Congress and this White House to work together. More importantly, they represent an opportunity for American employers and workers at a time when our economy needs every bit of help it can get.
Before I take any questions you all might have, let me ask you all for a bit of help. I know you are already involved, but I need you to do more. Increase the pressure on this White House to act on all three pending trade agreements, and just as importantly, explain back home why we need these agreements. Keep the pressure on them to engage in revenue neutral tax reform for both businesses and individuals, since so much business income is earned by pass-throughs who pay the resulting tax on their individual income tax returns. If we do that together, I am confident we can and will get this economy turned around.
Yes, these are certainly big challenges, but big challenges can produce big successes. As I learned when I assumed the Chairmanship – in America, anything is possible.