Chairman Brady Delivers Keynote Address at Tax Competition Conference
WASHINGTON, D.C. – Ways and Means Chairman Kevin Brady (R-TX) today delivered the following keynote address at the International Tax Policy Forum (ITPF) and Georgetown Law’s Institute of International Economic Law (IIEL) Conference on tax competition.
Remarks as prepared for delivery:
“Thank you, John, for the kind introduction, and thank you all for having me today. I’m honored to be here.
“Before I get started, I want to give a special thank you to the hosts of today’s conference—Georgetown Law’s Institute of International Law and the International Tax Policy Forum.
“What you have done with this conference is very special and it’s incredibly beneficial to our tax reform efforts in Congress.
“Rarely do we get some of the world’s brightest minds in academia and public policy, and representatives from some of the largest global job creators all in one room.
“I think it speaks directly to the outstanding work being done by today’s sponsor organizations. And, more than that, I believe it underscores the urgent need for leaders in Washington to take a hard look at where we stand globally, and examine what we need to do to strengthen America’s international competitiveness.
“For me, a tax nerd, it’s always an honor to have the opportunity to talk about tax policy. But, today is an especially historic day to do so.
“Today is the 104th anniversary of the ratification of the 16th Amendment, which formally established the federal income tax.
“Don’t everyone cheer at once.
“The 16th Amendment is simple—it’s just 30 words. It says:
“‘The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.’
“It’s amazing to think about what has come from that one simple sentence.
“From those 30 words, we now have the highest corporate income tax rate in the developed world.
“From those 30 words, we now have a tax system that puts ‘Made in America’ products at a tax disadvantage both here in the United States and around the globe.
“And, from those 30 words, we now have a tax code that is so complicated that, according to the Tax Foundation, American businesses and families spend more than a combined 6 billion hours and $30 billion just to file their taxes each year.
“From those 30 words, we can all understand what Will Rogers meant when he said:
“‘The difference between death and taxes is death doesn’t get worse every time Congress meets.’
“Here’s what I think when I read the 16th Amendment: Our tax system does not have to be this way.
“The wording is clear—‘Congress shall have power to lay and collect taxes on incomes, from whatever source derived.’
“That means Congress and the American people have a choice in how our tax system works. We have control over it.
“And, if we don’t like our current tax system, those 30 words give us the power to change it and develop a new one that functions however we want.
“We can make it as simple or as complex as we want.
“We can make it as pro-growth or as slow-growth as we want.
“We can make it as globally competitive or uncompetitive as we want.
“When House Republicans began developing our ‘Better Way’ tax reform Blueprint last year, those three choices were at the heart of every decision we made.
“We looked at the boldest, most innovative policy solutions available. And—just as all of you have today—we took a hard look where America stands today relative to our international competitors.
“One thing became clear: Not only are we struggling to compete and win internationally—in many policy areas, we’re not even in the game.
“So, with our Blueprint, we said let’s make the system simple. Let’s make it pro-growth. And, above all, let’s make it as internationally competitive as we possibly can.
“Thanks to the hard work of our Members on the Ways and Means Committee and the vision and leadership of Speaker Ryan, we were able to deliver the kind of tax code our nation truly needs today.
“Our Blueprint delivers a tax code built specifically to leapfrog America from dead last among our global competitors back into the lead pack of the most pro-growth tax systems on earth.
“This starts with providing the lowest tax rates in modern history for American businesses of all sizes.
“No longer will America be sitting on the sidelines with the highest corporate rate in the world. Instead, we’re proposing a corporate rate of 20%—a rate that gets us into the game in a major way.
“For small businesses, no longer will you be taxed under the individual side of the code at rates as high as 44.6%.
“Instead, our Main Street job creators will be taxed at a top rate of no more than 25% so they can keep more of their income and reinvest it in growing their businesses, hiring new workers, and raising wages.
“This reduction in rates for pass-throughs is really historic. Exercising that choice and power afforded to Congress under the 16th Amendment, we decided that, for the first time in history, we would finally separate wage income from small business income. We decided that it was finally time to stop taxing Tom’s Bike Shop and Tom Brady at the same rate.
“While lower rates will certainly get us back into the game, they are not enough to stimulate the growth and competitiveness our nation truly needs to be a 21st century economic leader. That’s why we also take historic steps to unleash investment in America.
“For the first time in history, our Blueprint provides all businesses with the ability to immediately write-off the costs of new capital investments.
“So, instead of the complex depreciation rules we have today, there will be a tax-free return on purchases of new equipment, technology, or machinery that our job creators need to produce and compete at a higher level.
“This policy—full and immediate expensing—is one of the most pro-growth solutions around. Not only will it unleash business investment in the United States, it will help tremendously to enhance productivity in America—both of which are vital ingredients for economic growth that have been missing in recent years.
“Finally, to ensure we leapfrog America back into that lead pack and keep us there, we are proposing to replace our worldwide tax system with a territorial tax approach and to end the ‘Made in America’ tax on U.S. exports.
“Unlike our foreign competitors, the United States does not currently tax the sale of products based on where the sale takes place.
“Instead, we tax the sale of products based on whether those products are made in America or if the business making them is headquartered here—hence the ‘Made in America’ tax.
“This ‘Made in America’ tax is one of the most antiquated, uncompetitive, and anti-growth features of today’s U.S. tax code. It puts our ‘Made in America’ goods, services, and intellectual property at a direct tax disadvantage here at home and around the world.
“And, worst of all, it provides a direct tax incentive for businesses to move jobs, investment, and operations outside the United States. After all, if it’s not made in America, it’s not subject to the ‘Made in America’ tax.
“So, for the first time in our nation’s history, we are proposing to end this ‘Made in America’ tax and completely rework the way we tax the sale of foreign imports and American-made exports.
“Our proposal is simple and it’s based on one powerful idea: All products consumed in America will be taxed at an equal rate, regardless of whether they are made in America or abroad.
“This policy—sometimes referred to as border adjustability—is how all of our foreign competitors implement their VAT taxes.
“But, unlike our foreign competitors, this is not a VAT. Also, unlike our current tax system, it’s not an origin-based business income tax.
“This is a smarter, simpler destination-based cash flow tax that is far more pro-growth. And, with it, we will level the playing field.
“No longer will foreign imports have an advantage over ‘Made in America’ products here in the United States. Instead, all products will be taxed equally. And, who can argue against equal taxation?
“Additionally, no longer will the ‘Made in America’ tax on U.S. exports put our businesses, workers, and products at a disadvantage overseas. If your American-made product or service is sold abroad, it’s not going to bear U.S. tax. Period.
“In the end, this move to eliminate the ‘Made in America’ tax is a simple but very powerful way to promote true competition based on price, quality, and service instead of tax regimes.
“And, when combined with the other historic reforms we are proposing, it will eliminate every tax incentive for businesses to move jobs, headquarters, and research and development outside the United States.
“This proposal is truly a game-changer. And, without it, we will not be able to accomplish our goal of establishing the United States as 21st century magnet for investment, job creation, entrepreneurship, and innovation.
“As simple as this solution is—taxing all products equally in the United States—we also recognize there will be questions and concerns. We welcome the feedback.
“If there is anything you remember from today it’s this: If we have the power to make our tax system as bold, as pro-growth, and as competitive as we want—and we do—why in the world would we hang onto provisions that put our products at a worldwide disadvantage and drive American businesses and jobs overseas?
“This is the one thing we cannot afford to do.
“Today, we are closer to comprehensive, pro-growth tax reform than at any point in the past 30 years. As we move forward, we welcome your input and we are going to consider all ideas that will help us deliver the 21st century tax code our nation needs to compete and win around the world.
“Thank you again for having me. I am happy to take your questions.”