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January 31st, 2014 4:49 pm
Corporate Tax Reform: Don’t Waste This Crucial Opportunity
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In his otherwise lackluster State of the Union address this week, President Obama stated to bipartisan applause that he’d like to lower America’s corporate tax rate and reduce the Byzantine array of loopholes in our code.  That policy is actually supported by leaders in both parties, including Speaker John Boehner, and the Republican and Democratic chairmen of the House and Senate tax-writing committees.

And as we recently noted, reform is necessary, given the complexity of America’s nearly three-decade old tax code.  The problem remains that Congress has been too timid to take the hard steps necessary to lower America’s corporate tax rate to 25% from 35% – which is the highest rate amongst all OECD nations.  Because of this anticompetitive rate, the United States is at a huge comparative disadvantage globally.

And CEOs have taken notice.

Several hundred corporations have unfortunately chosen to reincorporate abroad to dodge U.S. taxes in recent years.  While the practice is technically legal, the opportunity costs for the United States are huge.   Some 484 U.S. companies were bought by foreign companies in the first half of 2013, for a total of $43.6 billion, according to Thomson Reuters.  That provides a wake-up call that action on corporate tax reform is absolutely crucial.  President Obama called for a ‘year of action’ in this week’s address, and threatened to use his executive powers in a constitutionally dubious manner.

For tax reform, Congress needs to act swiftly to ride this rare bipartisan wave and introduce legislation that supports a fundamental overhaul of America’s tax code.  American-owned businesses lead globally in innovation and economic growth, and our tax reform should support their success, not drive it overseas.

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