Freedom Line Blog

The United States keeps shooting itself in the proverbial foot with our foolishly high and complex corporate tax rate.  Fully 31 of the world’s 34 leading economies have lowered their corporate tax rates since 1997 alone, but the U.S. is not among them.  Consequently, as all other competitor countries lower their rates, corporations flee for better shores, never to return.  And with those corporations go critical American jobs.

Maintaining a federal corporate tax rate of 35% in addition to various state corporate taxes – the highest in the developed world – doesn’t just impede American businesses.  The code is also riddled with Byzantine loopholes that warp decisionmaking and dictate winners and losers.  And contrary to popular myth, most of those loopholes aren’t accessible to most companies.  To the contrary, new research by PricewaterhouseCoopers (PwC) reveals that the effective tax rate for corporations was 36.2% from 2004 – 2010.  Stripping out many of the false assumptions of the GAO report that claimed an effective U.S. rate of approximately 13%, the PwC report is a devastating indictment of our tax code that highlights its unfair and punitive nature.

Our economy continues to struggle, and with so much regulatory uncertainty and chaos in Washington it would be nice to focus on something on which everyone sees eye-to-eye.  Reforming the corporate tax rate is precisely that sort of bipartisan solution, something widely acknowledged by both sides as the correct move.  Even President Obama, whose policies have done so much to impede economic and job growth, has gone out of his way to emphasize that reality.  We simply must reduce corporate tax rates and reform our tax code so that our economy isn’t permanently crippled by it.  Although pronouncements of the downfall of the United States are greatly exaggerated, it would be wise for us to avoid heading down that path due to outdated corporate tax policies that nobody supports.

The time for reduction and reform is now, before it really is too late.