Cut Corporate Income Taxes

America has been called the land of opportunity largely because it has been a place where businesses and individuals prosper.  This has been the result of a stable government, an educated workforce, protection of intellectual property, and a tax rate that historically has been low. Unfortunately, taxes are now going in the wrong direction. 

According to a 2008 report by the Tax Foundation, the corporate income tax rate in the U.S. isnow 50 percent higher than the average for the rest of the countries in the Organization for Economic Co-operation and Development (OECD).  In order to keep businesses in the U.S.and attract new investment,Congress needs to cut the corporate income tax rate. 

President Obama’s National Commission on Fiscal Responsibility and Reformreleased a draft report on November 10, 2010,which listed cutting the corporate tax rate from 35 percent to 25 percent, among the policies that would help jumpstart the economy and reduce the $13.7 trillion national debt.  In an October 4, 2010 Wall Street Journal article President Obama voiced support for a broad rewrite of the corporate tax code, including a lower corporate tax rate, but conditioned his support for a lower rate on closing other tax loopholes.  A tax cut is not a cut if it is conditioned upon other tax increases. 

Lower corporate income tax rates are already gaining support in other counties.  In a August 13, 2010 CNBC.com article, Doug Shackelford, a tax professor at the University of North Carolina Kenan-Flagler Business School, “agreed theU.S. rate is ‘long-term unsustainable,’ particularly as more nations—including Japan, which at 40 percent has the highest rate—cut their corporate rates or plan to do so. ‘The rest of the world has come down a lot, so now we are an outlier on the high side.’”According to a June 25, 2010 article in TheDaily Caller, “Japan’s freshly minted prime minister announced last week that his new government would reduce Japan’s corporate tax rate, now the highest in the world among major industrialized nations, leaving the United States as the world leader in corporate taxation.” 

The World Bank’s Paying Taxes 2011 report also noted that in 2009 and 2010, 17 economies (including Germany, Singapore, and Canada) reduced corporate income tax ratesto help businesses cope with the worldwide economic slowdown.  The U.S. did not follow suit.  Having the highest corporate tax rate will not bring more businesses to U.S. shores. 

Citizens Against Government Waste has long supported lower tax rates for both individuals and businesses.  As the U.S. economy continues to grow slower than desired, corporations could certainly use tax relief.Politicians would be wise to adopt policies that lower the corporate income tax rate and bring it in line with other developed countries.  Failing to lower the tax rate means that other counties will be more welcoming of new investment and the U.S. will lose opportunities for economic growth. 

  — MacMillin Slobodien