Executive Summary
America’s corporate tax rate is one of the highest in the industrialized world. Currently, the U.S. corporate tax rate is 35 percent, compared with an average of 23 percent for its industrialized competitors. Reform is becoming increasingly urgent as the gap between American and foreign rates widens. Not only are U.S. corporations at a disadvantage when they operate abroad, but high tax rates are driving American companies overseas. For example, Aon Corporation, the Chicago-based insurance company, recently relocated its headquarters to London for tax reasons.
The last major revision of the tax code occurred in 1986, and some of those reforms have been undone by rate increases. America should lower the corporate tax rate and switch to a territorial tax system. This would increase economic growth and allow corporations to compete on an equal footing with competitors abroad. Contrary to what critics assert, lowering the corporate tax rate would not deplete the domestic tax base nor would it result in a loss of American jobs.
This report begins with a brief discussion of America’s current corporate tax system, and then analyzes the presidential candidates’ plans for reform. The taxation of foreign income is one of the most complex parts of the Internal Revenue Code, and this report does not pretend to go into all the details. Rather, it offers an overview of some of the major issues under discussion.
The Global Tax System
America’s corporate tax system is exceptional. Usually, when people talk of American exceptionalism, they mean it as a compliment. But America has one of the highest corporate tax rates in the industrialized world, at 35 percent.
Furthermore, America taxes corporations on their worldwide income. Only seven of the 34 Organisation for Economic Co-operation and Development (OECD) countries do the same. This places America at a competitive disadvantage.
This problem is recognized by Democrats as well as Republicans. In June, Senate Finance Committee chairman Max Baucus delivered an indictment of the corporate tax system in a speech before the Bipartisan Policy Center, a Washington think tank.[1]
Read more: http://www.manhattan-institute.org/html/ir_29.htm#.UISSM4XJKt8
America’s corporate tax rate is one of the highest in the industrialized world. Currently, the U.S. corporate tax rate is 35 percent, compared with an average of 23 percent for its industrialized competitors. Reform is becoming increasingly urgent as the gap between American and foreign rates widens. Not only are U.S. corporations at a disadvantage when they operate abroad, but high tax rates are driving American companies overseas. For example, Aon Corporation, the Chicago-based insurance company, recently relocated its headquarters to London for tax reasons.
The last major revision of the tax code occurred in 1986, and some of those reforms have been undone by rate increases. America should lower the corporate tax rate and switch to a territorial tax system. This would increase economic growth and allow corporations to compete on an equal footing with competitors abroad. Contrary to what critics assert, lowering the corporate tax rate would not deplete the domestic tax base nor would it result in a loss of American jobs.
This report begins with a brief discussion of America’s current corporate tax system, and then analyzes the presidential candidates’ plans for reform. The taxation of foreign income is one of the most complex parts of the Internal Revenue Code, and this report does not pretend to go into all the details. Rather, it offers an overview of some of the major issues under discussion.
The Global Tax System
America’s corporate tax system is exceptional. Usually, when people talk of American exceptionalism, they mean it as a compliment. But America has one of the highest corporate tax rates in the industrialized world, at 35 percent.
Furthermore, America taxes corporations on their worldwide income. Only seven of the 34 Organisation for Economic Co-operation and Development (OECD) countries do the same. This places America at a competitive disadvantage.
This problem is recognized by Democrats as well as Republicans. In June, Senate Finance Committee chairman Max Baucus delivered an indictment of the corporate tax system in a speech before the Bipartisan Policy Center, a Washington think tank.[1]
Read more: http://www.manhattan-institute.org/html/ir_29.htm#.UISSM4XJKt8
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