WASHINGTON, D.C. –Speaker Paul Ryan gave a speech on tax reform before the National Association of Manufacturers. In the speech, he restated his position that corporate tax cuts will create jobs and that the United States should move to a territorial tax system.
In response, FACT Coalition Executive Director Gary Kalman issued the following statement:
Today, Speaker Ryan said that tax cuts and reform are about: “…jobs, jobs, jobs. Good, high-paying jobs.”
In the current environment, there is scant evidence to support his theory. Corporate reserves are at historically high levels. Interest rates are still comparatively low so companies can borrow cheaply. Slow growth would appear to be less about access to capital and more about the uncertainty of markets and buyers.
Businesses seem less confident that if they invest in producing more widgets, there is a market to purchase those widgets. Tax cuts that simply add to corporate reserves seem unlikely to change that dynamic.
Further, while we agree that the offshoring of profits is a huge problem, Ryan’s much touted plan to move to a territorial tax system would make this problem worse, not better. Under a territorial tax system, U.S. companies could end up paying nothing in taxes on profits they shift offshore, giving an even greater incentive to move profits and real operations offshore. The reason many countries around the world have embraced the unprecedented Base Erosion and Profit Shifting project is precisely because their moves to a territorial tax system have led to widespread problems with corporate tax avoidance.
We should learn from their mistakes, not replicate them.
There are ways to increase market demand and slow capital flight. Tax cuts and tax policies that further encourage profit shifting are unlikely to accomplish either.