The United States can create 5 million new jobs over the next five years if our nation puts in place an innovation agenda that includes business tax reform.
That’s according to a groundbreaking study that demonstrates startups are sprouting up across the country, both in traditional technology hubs as well as 25 “Next in Tech” cities.
Despite the challenging political environment, Congress and the White House have a window of opportunity to act. If we get tax reform right, it will jumpstart dynamic growth and job creation in our nation. If we fail to act, it puts in jeopardy America’s technology leadership around the world and the creation of good-paying jobs here at home.
America’s corporate tax system is broken, posing a long-term threat to investment, innovation, and job creation in the United States. The U.S. has the highest corporate tax rate in the developed world – higher than France, Brazil, Venezuela, and dozens of other nations. As a consequence, there are $3 trillion in earnings from U.S. companies locked overseas that otherwise could be invested in the American economy. This makes no sense. Our tax laws should encourage investment here at home.
The last major overhaul of our nation’s tax code was in 1986 when many of today’s leading technology companies were just in their infancy or did not exist at all. Our tax system was built for a different age. That’s why it is so imperative that we build a system for the modern era, one that encourages innovation from dynamic startups and iconic companies alike.
Here are a few things the reforms should accomplish:
Encourage startup creation – Startups are our nation’s job engine. High-growth startups create jobs faster than traditional companies, and many of these jobs pay well above median wages. We are seeing the creation of a new wave of jobs that blend traditional industries with high-tech skills. This could be a “junior merchandiser” near Cleveland that helps curate on-trend looks for an e-commerce website, or it could be a “laundry facility assistant” at an on-demand dry cleaner in Charlotte. If we want to create more good-paying jobs across the country, we must do all we can to make it is easier for startups to grow.
Support Research & Development (R&D) – If startups are the source of job creation in our nation, then R&D is the foundation for innovation. In 2015, America spent a record $500 billion on research and development, 69% of which came from the private sector. But there’s no guarantee that these dollars will remain in our country. Other nations are rolling out the red carpet for American businesses to establish innovation centers abroad because they want a larger piece of the R&D pie. That’s why it is imperative that our tax code continues to prioritize R&D investment in the United States.
Ensure that intellectual property is both created and commercialized in the U.S. – Europe is in the midst of a concerted campaign to unfairly target American companies and steer more tax revenue into their treasuries. If we do not act, American companies that operate abroad will continue to be targeted, causing irreparable harm to the U.S. tax base and our overall economy.
So, what should be done? To spur dynamic growth, support innovation, and encourage job creation, the United States should lower its corporate tax rate to ensure that American companies can compete on a level playing field with competitors across the globe. This would encourage the risk-taking associated with startups and help the most successful businesses put more money back into jobs, research and development, and growth here in the United States.
Beyond that, American businesses should be able to bring home the $3 trillion that is locked overseas so it can be invested in the U.S. economy. Additionally, we must preserve and enhance the research and development tax credit, which is the cornerstone of U.S. innovation. Finally, we must update our rules governing intellectual property in a way that creates incentives for R&D, job creation, and services to remain in the U.S., rather than fly abroad.
There is no doubt that tax reform is difficult, particularly in today’s climate. But this issue is too important to put off. Congress should move forward in putting together legislation to modernize our tax code so we can encourage businesses to create jobs here at home and ensure our nation remains the global leader in innovation.
Linda Moore is the president and CEO of TechNet, a national bipartisan network of technology executives.