Pete Sepp is executive vice president of the National Taxpayers Union.
When it comes to fiscal and energy policies here in the United States versus those in other countries, it's important to recognize details that can make comparisons and contrasts difficult. Sometimes, however, the indicators are so strong that it's impossible to avoid drawing some conclusions about whether the United States is staying ahead or lagging behind the rest of the world in key areas such as business taxes and energy development.
I was reminded of this last week when I was attending the members' conference of the World Taxpayers Association, an alliance of citizen groups founded in 1988 to work together for lower taxes, less waste, accountable government, and taxpayers' rights all over the world. As with past years and locations, the 2012 event (held in Kiev, Ukraine) brought together dozens of representatives from countries across the globe to share experiences and learn how to become more effective advocates for limited government. As it turns out, U.S. policymakers have more than a thing or two to learn from their colleagues abroad.
Some of the lessons are of course cautionary. For example, high value added taxes and other heavy government exactions on fuel, especially in Europe, can make the use of traditional energy for everyday travel a costly proposition for consumers—worse than the $4-per-gallon gasoline our own citizens unpleasantly encountered earlier this year.
Other lessons ought to be more inspirational for Americans. Taxpayer advocates from nations such as Kazakhstan and Georgia told the World Taxpayers Association conference participants how they recently reshaped their entire tax systems to make them simpler, less burdensome, and more attractive to outside investment. And since the early 1990s, more than 20 nations have replaced their punitive, "progressive" income tax laws with flat-rate structures; many of these countries benefited from the advice and the assistance of World Taxpayers Association's emissaries.
Whether positive or negative, all of these lessons should serve as motivation for complacent policymakers in Washington. The United States has not conducted a serious overhaul of its tax system since 1986. Indeed, if some elected officials in this country get their way, our already stagnant tax policy will be moving backward, especially in regard to energy.
Despite calling for a reduction in the corporate tax rate, President Obama also seeks to take away a commonly claimed tax deduction among domestic manufacturers, but only for certain oil and gas companies. Favored "green energy" firms, on the other hand, could be in line for bigger credits, thereby further distorting the tax system and undermining confidence that the laws will treat every business and consumer the same. U.S.-based multinational oil and gas companies, which already face stiff competition from foreign government-owned or subsidized entities, could (under several proposals in Congress) lose some of the "dual capacity" protection from double-taxation on their worldwide operations.
Even on the most elementary level—ease of compliance with the law—the United States is on shaky ground. "Paying Taxes," an annual study from PricewaterhouseCoopers and the World Bank Group, assessed more than 180 countries' tax systems for a hypothetical midsized business based on total tax rate as well as coping with filing requirements. The United States ranked an embarrassing 69th best. The time-to-file burden alone on such a firm in the United States was 187 hours, worse than what it would contend with in Canada (131 hours), Hong Kong (80 hours), the United Kingdom (110 hours), or France (132 hours). All four of those nations had representatives at the World Taxpayers Association conference.
According to the PricewaterhouseCoopers analysis, 33 countries made business taxes less onerous last year by reducing rates or streamlining filing procedures. Guess who didn't make that list?
Meanwhile, as my colleague Nan Swift recently recounted, some countries in Europe—including Spain and Germany—are pulling back from the heavy subsidies for uneconomical "alternative" sources that once marked their approaches to energy policy.
Hopefully the accumulating mountain of evidence and anecdotes from other countries will prod U.S. leaders toward tax reform and away from harmful policies that undermine affordable energy development. Failing to change course now could mean big trouble for our still-struggling economy.