The U.S. is one of the only countries in the developed world which seeks to tax the worldwide income of our own taxpayers. This creates a double taxation problem, since the same foreign-source income can face taxation in the other country, and can face taxation by the IRS. Over the years, Congress has created hundreds of deductions, credits, deferrals, and exclusions to mitigate this double taxation. The Left wants to take these protections away and expose this income to double taxation, killing jobs. The better solution is to move toward territoriality, the system the rest of the world uses. Under a territorial tax system, only income earned in the United States would be taxed by the United States. As a step toward territoriality, ATR supports allowing companies to repatriate deferred foreign earnings at a zero or low tax rate.
International Tax Competition
The United States has the highest corporate income tax in the developed world—nearly 40 percent when including states. Because capital is more mobile than in the last century, many corporations are choosing to move to lower-tax countries. Our trade competitors have learned this lesson, and have been steadily-reducing their corporate tax rates. The average corporate tax rate in Western Europe is now 25 percent and falling. In many countries, the rate is in the teens. If the U.S. is going to remain competitive with the rest of the world, it’s imperative that we get the corporate tax rate at or under 25 percent, the European average.