The United States last overhauled our corporate tax code back in 1962 — when “Lawrence of Arabia” was best picture and John F. Kennedy was president. At that time, 18 of the world’s largest 20 companies were American. Forty-one years later, after more than 30 years of Democratic Congresses increasing taxes on U.S. employers, only eight of the world’s largest 20 companies are American. Foreign competitors are buying U.S. companies at a record pace, and U.S. employers are leaving the United States to escape punishing, job-destroying taxation.

Even worse, U.S. employers currently face the possibility of a $4 billion tariff increase on their exports. These sanctions are the result of a World Trade Organization decision ruling that the Extraterritorial Income provisions of the U.S. Tax Code are an illegal export subsidy that violates our trade agreements. Unless the United States repeals the ETI regime, the European Union has stated it will impose sanctions as early as Jan. 1, 2004. The EU has targeted some of America’s most sensitive industries, including agriculture, steel, textiles, apparel, wood and paper products and manufacturing tools. EU sanctions will result in the loss of tens of thousands of American jobs in these important industries. Congress must act to prevent sanctions and preserve American jobs.

We should view the repeal of ETI as an opportunity to undertake broad fundamental reforms of our tax system to help U.S. employers and workers be more competitive. Increasing competitiveness and creating jobs requires real across-the-board tax cuts. We cannot squander this opportunity for fundamental reform on narrowly targeted Band-Aids. Deceptively packaged schemes that increase taxes in the short term and only redistribute the punishing, job-destroying U.S. tax burden in the long term do not enhance American competitiveness, increase entrepreneurial incentives or create new American jobs. We need to cut taxes for all U.S. employers, not just shift taxes from one employer and its workers onto another employer and its (just as hard-working and just as deserving) workers. That is a zero-sum game that will result in zero job creation.

Accordingly, President Bush’s fiscal ’04 budget recommends repealing ETI and enacting provisions that fundamentally reform the U.S. taxation of American multinational exporters. This is an appropriate fundamental reform recommendation because American exporters that currently receive the vast majority of ETI benefits are American employers with complementary multinational operations. These companies’ multinational operations make them successful exporters of American products and allow these American employers to create high-paying jobs in the United States.

However, the United States also is experiencing a crisis in our manufacturing sector. Manufacturers are facing ferocious global competition. It is crucial that these American manufacturers receive significant tax relief so that they and their employees can succeed in a highly competitive global marketplace. Therefore, we also need broad, fundamental reforms that address the particular plight of the manufacturing sector.

The American Jobs Creation Act of 2003, introduced July 25, achieves both fundamental reform objectives by providing tax relief to all U.S. employers — big and small, profitable and unprofitable — with a particular emphasis on manufacturers and exporters. The American Jobs Creation Act fixes the United States’ global tax rules so that American exporters can remain competitive, and it also provides more than $100 billion in tax relief to domestic, American manufacturers. Further, as the American Jobs Creation Act moves through the legislative process, we will have the opportunity to improve and expand the tax reform and tax cuts in this legislation — particularly those reforms and tax cuts aimed at manufacturers.

Unlike other proposals, the American Jobs Creation Act provides fundamental reform and real job-creating tax cuts immediately. The American Jobs Creation Act even helps unprofitable employers — the very employers that need the most help. In addition, it also extends tax cuts to millions of small employers and their workers and families that have chosen to operate as “S” corporations, partnerships or sole proprietorships.

The American Jobs Creation Act of 2003 includes:

• ETI repeal. ETI is repealed under the following schedule: 100 percent ETI benefits in 2003, 65 percent in 2004 and 35 percent in 2005. The phase-out provides a “soft landing” for current beneficiaries but does not invite retaliation against those industries and workers that are on the EU’s retaliation list.

• 32 percent corporate rate ($19.5 billion). The new 32 percent tax rate is a tax cut for those small and mid-sized employers with taxable income of less than $10 million. In fact, 99.7 percent of “C” corporations, including small or mid-sized manufacturers, will have a top tax rate of no more than 32 percent.

• Alternative Minimum Tax relief ($17 billion). The National Association of Manufacturers calls AMT the “Anti-Manufacturing Tax” because it falls most heavily on capital intensive and cyclical businesses — manufacturers. The bill significantly reforms the AMT so that it will no longer destroy jobs — particularly manufacturing jobs.

• Research and development tax credit ($23 billion). Manufacturers receive more than 80 percent of the R&D tax credit. Because R&D and the R&D tax credit are vital to the manufacturing sector, the R&D tax credit is both expanded to better assist manufacturing R&D and extended for 3.5 years.

• Manufacturing equipment depreciation ($34.5 billion). The provision reduces the tax rate on capital investment in manufacturing facilities in the United States. This provision assists both manufacturers that invest in U.S. factories and the machine tool industry that sells the new equipment for these facilities. The tax savings from this proposal go exclusively to investment in U.S. domestic manufacturing.

• Bonus depreciation ($12 billion). Employers benefit from bonus depreciation through accelerated depreciation on capital investments and increased sales to customers that purchase capital goods. This provision is particularly powerful for manufacturers because both their capital purchases and their customers receive tax relief. This bill extends the 50 percent bonus depreciation through Dec. 31, 2005.

• Leasehold and restaurant improvements ($7 billion). Existing tax law discourages business from regularly improving and remodeling. Removing this impediment will stimulate job creation in the construction industry and consumption of domestically produced manufactured goods. This provision provides benefits exclusively to domestic economic activity.

• Section 179 expensing ($2 billion). The ability of small employers to expense (immediately deduct) capital purchases enables them to expand their businesses. The 179 expensing provision in the Jobs and Growth Reconciliation Tax Act of 2003 (P.L. 108-027) is extended through Dec. 31, 2007.

• Net Operating Loss carryback ($5 billion). The current downturn in the economy has caused many employers, particularly manufacturers, to incur financial losses. The NOL provision will allow employers to carry back their 2003 losses for five years and get refunds of prior tax payments, helping them weather the downturn, invest in their businesses and retain and hire workers.

• Repatriation ($3 billion). This provision is estimated to result in $100 billion to $350 billion of foreign earnings — now permanently invested outside the United States — being brought back home for investment in U.S. plants, equipment and jobs.

• Multinational reforms. The bill contains a number of provisions to make U.S. exporters more competitive in the global market, resulting in an increase in U.S. jobs. The bill also will reverse the destructive explosion of foreign companies acquiring U.S. companies and keep U.S. jobs, production and research in the United States.

Assistant Treasury Secretary for Tax Policy Pam Olson, in her July 15 testimony before the Senate Finance Committee, stated that making the U.S. international tax rules competitive will lead to increased sales, increased U.S. domestic manufacturing to support those sales and more U.S. jobs.

Enhancing the ability of U.S. companies to compete in the global marketplace will increase, rather than decrease, U.S. jobs and production. Glenn Hubbard, chairman of the Council of Economic Advisors, stated in his June 13 testimony before the Ways and Means subcommittee on select revenue that each dollar of foreign investment results in $2 of additional exports of U.S. domestically manufactured goods.

• “S” corporation reforms ($1.5 billion). The bill contains a number of provisions reforming the taxation of “S” corporations. Millions of employers provide tens of millions of jobs under the “S” corporation structure. It is imperative that we include these employers and workers in any tax relief.

• Expatriation and tax shelters. Law-abiding American employers and workers are damaged when some corporations avoid and evade their responsibility to pay their fair share. This bill tightens the individual and corporate expatriation rules, as well as the tax shelter rules, so that all individuals and companies pay their fair share.

American employers — especially those in manufacturing — need real tax cuts and need them now. American employers and workers do not need misleading tax legislation that ignores small, medium and unprofitable employers and merely redistributes the U.S. tax burden.

The American Jobs Creation Act meets our international trade obligations and provides immediate and substantial tax relief to all U.S. businesses and workers, particularly those manufacturing in the United States.

Create American jobs — support the American Jobs Creation Act!

Rep. Bill Thomas (R-Calif.) is chairman of the Ways and Means Committee.