What do America’s lagging infrastructure, the skills gap, a broken corporate tax code, and distrust in both big business and government have in common? They all point to weaknesses in our system of long-term investment.
The fissures of a broken system are felt across the socio-economic spectrum. Workers are unable to support their families and they lack the training needed to advance in the modern economy. Municipalities around the country can’t trust that their tap water is safe to drink. Corporations are rewarded for keeping cash offshore rather than investing in the long-term health of the company and the commons.
With the health care debate off center stage, the chatter is once again about the acute need for tax reform. How might we use this historic opportunity to address fundamental problems with our corporate tax code, but also fix the system of long-term investment itself?
Goals for fixing corporate taxes include leveling the playing field for large and small businesses along with lowering the rate to make corporate taxes more globally competitive and reward investment in jobs at home. Tax avoidance in the corporate sector is also an issue; a higher yield and better enforcement can help address a host of needs, from dams, bridges, and water systems to long-term investment in R&D and worker training to connect people to 21st-century job skills.
Long before the candidates for the presidency were chosen, the Aspen Institute Business & Society Program began to develop a tax and investment framework to put America on a path towards long-term prosperity. Working with a non-partisan team of advisors and consulting with dozens of CEOs and tax and fiscal policy experts, the work culminated in The American Prosperity Project: A Nonpartisan Framework for Long-Term Investment, published in December 2016.
Signed by more than 30 CEOs, policy experts, and representatives of labor, the framework outlines a bold yet sensible pathway to secure America’s long-term prosperity. Signatories modeled the spirit of compromise that is necessary to solve complex problems and changes to the tax code are central to the recommendations.
Will the business lobby lend a hand? In the most recent Edelman survey of the general public on which institutions they trust, the results were telling. For respondents who feel the system has failed them, business was most trusted by a fair margin. But that doesn’t mean business is in the clear. Edelman sums up the challenge this way: “With a higher trust score than government, business is, in effect, the last retaining wall, holding back a rising tide of dissatisfaction. If business disappoints, it too will fall victim to the rising tide.”
If business aims to restore trust – or at least stand up to the public’s expectations – it requires putting the health of the commons ahead of the interests of an individual firm or industry. It means reforming the corporate tax code with an eye towards the investments we must make in our future rather than fracture into lanes of self-interest. Will business step up to the plate?
Our corporate tax code is a byzantine collection of protections and credits that fail to generate adequate revenue. The complex system rewards specific industries, invites tax avoidance for the rest, and is hard to enforce.
Viewing tax reform through the lens of long-term investment opens up sensible approaches to systemic reform. The American Prosperity Project endorses the goal of many experts to close loopholes and special carve-outs and to level the competitive playing field for companies. It calls to modernize elements of the tax code that keep money offshore. It supports a price on carbon to stimulate business innovation while generating revenue for citizens and regions adversely affected by globalization and the shift away from fossil fuels. There is support for a minuscule tax on financial transactions — as little as 0.03 percent — to both curb speculative trading and generate revenues for productive investment as the market adjusts. And it includes a call to rethink how we tax capital gains, beginning with what we consider a “long-term” investment.
True reform will make it easier for companies and financial markets to invest in the drivers of long-term value and assure that we reward productive long-term investment in the real economy.
None of this will be easy. We are reminded by Jared Bernstein in an American Prospect essay that presidents as disparate as Reagan, Clinton, George W. Bush, and Obama all managed to get some of their tax promises enacted, even while facing significant political opposition from Congress. Tax reform to make corporations more globally competitive while rewarding investment at home sounds like something President Trump can get behind. The people who voted to disrupt business as usual and help secure their prospects in the modern economy will benefit as well.
Judith F. Samuelson is the founder and executive director of the Business and Society Program, which works with business executives and scholars to align business decisions and investments with the long-term health of society — and the planet.
