Urgent need for tax reform

Novak, director of communications for think tank the John K. MacIver Institute for Public Policy and contributor for the Washington Times, pointed to the nation's current fiscal situation and the complex nature of the tax code, noting that he would be surprised if lawmakers did not consider tax reform in the near future.

These government officials have several potential options to choose from, as many lawmakers have offered proposals for tax reform. While their suggestions have mentioned several aspects of the tax code, the corporate income tax is one particular matter that has drawn attention.

Corporate income tax reform

Currently, companies headquartered in the U.S. pay a top corporate income tax rate of 35 percent. In comparison, the other 33 member nations of the Organization for Economic Cooperation and Development pay an average rate of 25 percent.

In addition, businesses headquartered in France, Belgium and Sweden, which are considered high-tax European countries, pay rates of 34.4 percent, 34 percent and 22 percent,respectively, according to the Tax Foundation.

Over the last few years, the largest trading partners of the U.S. - Japan, the U.K. and Canada - have cut their corporate tax rates in order to make themselves more appealing economically.

Incentive to hold profits overseas

Given the current tax framework, many global companies based in the U.S. keep the profits they earn in foreign countries overseas instead of repatriating them and paying the corporate income tax rate.

While this situation might benefit foreign investment, some have warned that it undermines both investment and job creation in the U.S. by discouraging major companies from bringing their profits home.

In an effort to make the current tax code more fair, Sens. Marco Rubio (R-Florida) and Mike Lee (R-Utah) have introduced a tax proposal that would cap the corporate income tax rate at 25 percent. In addition, the bill proposed by these two lawmakers would allow companies to deduct 100 percent of the expenses associated with capital investments, including equipment, land, structures and inventories.

In the tax proposal, the lawmakers stated that by reducing the top corporate income tax rate and providing businesses with greater ability to expense, they could help improve domestic economic activity by eliminating onerous taxes.

Obama proposal

President Barack Obama has also offered a proposal during his State of the Union Speech. Under this plan, the top corporate income tax rate would fall to 28 percent. In addition, the federal government would impose a one-time, 14 percent tax on all profits held overseas.

In the future, foreign earnings would have an immediate 19 percent tax rate, and companies would receive a credit for all taxes paid to governments overseas. Finally, the proposal would lengthen depreciation lives.

Tax burden

At the same time that lawmakers are offering their proposals, the nation's taxpayers are paying billions in the aggregate to file their taxes, Novak emphasized. He cited a 2011 report released by the Laffer Center, which stated that the direct outlays associated with filing these taxes cost Americans roughly $31.5 billion a year.

However, the Rubio-Lee plan would simplify the tax code, and the author stated that in the long run, it would have the additional benefit of accelerating economic growth by putting more money in the hands of consumers and bolstering their spending.

Building upon the aforementioned statements, Novak stated that while the Rubio-Lee proposal is likely not perfect, it does represent progress toward federal tax reform. The push to streamline the tax code seems to have built up significant momentum, and hopefully lawmakers will enact change in the near future.