Today’s guest blog comes from Dave Ricks, Lilly CEO.
We need to level the playing field for American companies and workers.
That’s the message I highlighted today during an interview on corporate tax reform with Maria Bartiromo on Fox Business.
The current U.S. tax system has yielded sluggish growth in GDP, jobs, and wages. We at Lilly think the U.S. House of Representatives' Blueprint for tax reform can turn this around.
Why do we need tax reform?
- The United States has the world’s third-highest corporate tax rate.
- It is one of the only countries that applies its high rates to foreign earnings—when those earnings are brought back to the United States.
- Over time, that high rate and double taxation have encouraged corporations to expand production in countries
with lower tax rates. That includes all other high-skill, high-wage nations, like those in Europe.
What would tax reform do?
- Cut corporate tax rates from 35 percent to 20 percent.
- Stop taxing the income that U.S. companies make in other countries.
- Instead of taxing everything made in the United States, regardless of where it's sold, the Blueprint would
instead tax everything sold in the United States, regardless of where it's made.
Tax reform doesn’t mean consumers pay more
Opponents of the Blueprint say assessing a 20 percent tax on imports would make imported products sold at retailers more expensive, hurting American consumers. Those fears are understandable but we think misplaced.
- Most economists agree that the U.S. dollar would respond to “border adjustability” by rising in value, compared with foreign currencies.
- If so, this would offset the impact of the 20 percent tax on imports. Why? Because consumers would need to spend fewer of these more valuable dollars to buy imported food or toys or electronics.
- Also, a rise in the dollar’s value would offset the House Blueprint’s exemption of exports from taxation. So
there would not be an unearned windfall for American exporters.
Lowering rates and eliminating the current penalty for making things in the United States would give a much-needed lift to all American companies and workers. That’s something we all should support.