Simple Illustration Explains Need for Corporate Tax Reform
Inexplicably, the U.S. stubbornly maintains the developed world’s highest corporate tax rate. We also hold the inglorious distinction of taxing income earned overseas a second time, even after taxes were already paid in the nations where it was earned. Obviously, that only incentivize businesses to leave America for more hospitable foreign shores and take jobs with them.
A simple illustration courtesy of The Wall Street Journal drives home the point:
The U.S. system of worldwide taxation means that a company that moves from Dublin, Ohio to Dublin, Ireland, will pay a rate that is less than a third of America’s. A dollar of profit earned on the Emerald Isle by an Irish-based company becomes 87.5 cents after taxes, which it can then invest in Ireland or the U.S. or somewhere else. But if the company stays in Ohio and makes the same buck in Ireland, the after-tax return drops to 65 cents or less if the money is invested in America.”
When people wonder why over seven years of economic “recovery” doesn’t feel like a recovery at all, this is a leading reason. Our unsustainably high rate and double-taxation regime is simply unacceptable, but the good news is that the coalition favoring reform is bipartisan. That’s an encouraging sign regardless of who wins in November, but it’s time to finally get this done before even more businesses and jobs move overseas.