Tax reform is an opportunity US can't afford to miss

Why tax reform is so hard
Why tax reform is so hard

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Story highlights

  • David Farr: US manufacturing workers face increasingly fierce competition from overseas
  • Federal tax policies put US companies at a clear disadvantage, he says

David Farr is chairman and CEO of Emerson. He is the chair of the board of the National Association of Manufacturers. The opinions expressed in this commentary are his.

(CNN)America is standing at a crossroads. We face a historic opportunity to lift American workers up, grow paychecks, create more jobs and out-compete the rest of the world. We have the chance to boost manufacturing in the United States and strengthen the backbone of our economy: American manufacturing workers. Tax reform is an opportunity we cannot afford to miss.

In addition to the personal toll of high taxes, which raise the costs of living for everyone, American manufacturing workers face increasingly fierce competition from overseas. This threatens both job creation and economic growth here at home. There is no question that federal tax policies put American companies at a clear disadvantage.
Our international competitors know this. They have modernized their tax systems to make it more attractive to do business in their countries. The United States, on the other hand, hasn't reformed our tax code since 1986, when the world looked dramatically different.
    If you're like me, you look at today's outdated tax code and ask: What are we doing to ourselves? What are we doing to American businesses and workers? We get to write our own rules, so why are we writing rules that penalize success, harm families and give our competitors an advantage?
    The longer we fail to act on tax reform, the more time other countries have to gain an edge on the United States. The more we wait, the less money we will invest in research and development for new technologies or lifesaving breakthroughs.
    Those who defend the current tax code are defending a manufacturing worker in Ohio losing a job to a worker overseas. They are defending less innovation and fewer technological and medical discoveries. They are defending years of tightening family budgets, stagnant wages and communities losing hope.
    In a country with so much incredible potential, it's indefensible. But we can do something about it by modernizing our tax code to promote the type of economic growth and job creation that will raise personal incomes, reduce the costs of living and make lives better for everyone. So many Americans are struggling to get by, with no hope for saving for the future, much less retirement. We can change this -- and fast.
    First, to stay ahead of the curve, we must cut tax rates for all businesses. Manufacturers have long championed a 15% rate for those organized as corporations. We are encouraged that the framework agreed upon by White House and congressional leaders has gotten close to that.
    We also need similar significant reductions for the two-thirds of manufacturers -- mostly small businesses -- that are organized as pass-throughs and pay taxes at the individual rate. Small manufacturers are the heart of our industry, and small businesses drive our economy, so it's time for the tax code to stop treating them like an afterthought.
    Second, the United States needs to catch up with the rest of the world and implement a territorial tax system, which would allow companies to be taxed once on overseas earnings. Today, if a US company wants to reinvest its overseas earnings in our American facilities, workers and communities, we get hit with a second, hefty tax bill that many of our overseas competitors do not. Why would we want to discourage companies from investing more in American workers?
    Third, we need a system that encourages businesses to make the kind of investments, such as new equipment, that empowers them to expand their companies, sell to more customers and ultimately create new jobs. Manufacturers also need strong research and development incentives to promote the kind of innovation that drives our country forward.
    A 2015 study from the National Association of Manufacturers showed that a reform package such as this over a 10-year period could add more than $12 trillion in gross domestic product, create more than 6.5 million jobs and increase investment by more than $3.3 trillion.
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    That is why manufacturers are all in on tax reform. If our leaders can improve the tax code for American workers, we will be able to tackle so many more of the challenges our country faces -- from job creation to community development, from health care to education.
    It is up to President Donald Trump and Congress to seize this opportunity to modernize the tax code. They said they will -- and said they will do so this year. On behalf of the more than 12 million Americans who work in manufacturing, we encourage our leaders to be bold and determined and do what is right and best for all Americans: Reform the tax code -- now.