The U.S. last reformed its business tax code in 1986, when Forbes reported that 218 of the world’s largest 500 companies were based in the U.S. Since then, the world economy has become larger and more competitive, and production and employment have become more globalized. Today, the U.S. is home to only 137 of the world’s largest 500 companies by sales and is competing with many countries for the production, research and jobs of global businesses. The current corporate tax code is a major impediment in this competition; it makes the U.S. less attractive as a place to do business and disadvantages American multinational companies.

After the 1986 tax overhaul, the U.S. had one of the lowest corporate tax rates among major economies in the world. Today, it has the highest. The U.S. is also one of the few industrialized countries that still have a “worldwide” system that taxes the foreign earnings of its multinational companies. In contrast, more than 90 percent of the world’s largest companies from advanced economies are based in countries with “territorial” systems that exempt most of the foreign earnings from domestic taxation. U.S. multinational companies, on the other hand, currently have about $2 trillion in foreign earnings that they cannot invest in the U.S. without incurring a substantial U.S. tax penalty.

The U.S. needs comprehensive corporate tax reform that reduces the corporate tax rate, broadens the corporate tax base and modernizes the international corporate tax system. Comprehensive reform should be revenue-neutral, paid for by eliminating corporate tax preferences.

There is strong congressional bipartisan support for comprehensive corporate tax reform. A lower corporate tax rate would make it attractive for both domestic and foreign companies to invest more in the U.S., with beneficial effects on U.S. job creation, wages and tax collections, which , in turn, would help reduce the deficit.

The combination of a lower tax rate and a broader tax base — achieved by eliminating corporate tax breaks and preferences — would reduce disparities in effective tax rates that advantage some economic activities at the expense of others and that distort investment decisions. Reform would also simplify the corporate tax code and reduce the high cost of tax compliance.

Moving our antiquated international system of corporate taxation toward a hybrid territorial system would level the global playing field by ensuring that companies compete based on productivity and innovation, rather than differences in home country taxation.

No country has a pure territorial system: Other advanced countries have developed hybrid systems that combine elements of a territorial tax system with measures that discourage income-shifting to tax havens and tax base erosion. The United States should develop comparable measures as part of its own hybrid system. A cut in the federal corporate tax rate to 25 percent, about the average of the developed countries of the Organisation for Economic Co-operation and Development, would alone dramatically reduce the incentives for income-shifting by U.S. multinational companies by rewarding investment and job creation in the U.S.

Right now, the U.S. is bypassing the chance for an economic renaissance because of its outdated corporate tax system. A comprehensive revenue-neutral reform that lowers the corporate tax rate, moves America to a hybrid international tax system, and eliminates tax breaks and preferences would achieve this goal without increasing the deficit. Indeed, by promoting faster growth, such a reform would contribute to long-run deficit reduction.

Reform will not be easy. But nearly 30 years after the last reform, we know what the problems are and we know the principles behind sensible solutions. Now Congress and the administration need to act.

Douglas Holtz-Eakin was director of the Congressional Budget Office under President George W. Bush. Dr. Laura Tyson chaired President Bill Clinton’s Council of Economic Advisers. They serve as economic advisers to the Alliance for Competitive Taxation, a group of 42 leading American businesses supporting comprehensive tax reform.