Friday, January 6, 2017

Can Trump Fulfill The Tax-Reform Promise?

President-elect Donald Trump spent much of his campaign promising to reduce taxes for American businesses and families.  His Treasury Secretary nominee Steven Mnuchin, along with Congress, now bear the weight of seeing that promise fulfilled, namely through comprehensive tax reform. Fortunately, a healthy bipartisan appetite exists for lowering the business tax rate, simplifying the code and applying it in a uniform fashion that does not penalize success.
There's good reason that America's antiquated and labyrinthine tax code was a frequent target on the campaign trail.  Our statutory corporate rate of nearly 40% (combined federal and state) is the highest in the world among advanced countries.
That's not a point of pride.  The onerous rate discourages investment, innovation and job growth at home.  Equally harmful has been its impact on the competitive fitness of American companies on the global stage, where foreign counterparts often face statutory rates in the mid-20% range. That disparity puts American businesses at a disadvantage in the global marketplace.
Then there is the vexing problem of inversions, wherein a U.S.-based corporation relocates its official headquarters to another, lower-tax country.  While the Obama administration viewed this phenomenon through the narrow focus of tax revenue, the incoming Trump administration appears to understand that it is, in fact, the manifest result of an inhospitable American tax structure.

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