by Mitch Kokai
Senior Political Analyst, John Locke Foundation
You’ll have to pick up a hard copy of the latest Fortune to read Nina Easton‘s argument for a “radical tax plan the left and right can agree on,” namely a corporate tax rate cut that includes the end of most existing loopholes.
But the excerpt below should prove enlightening.
At 35%, the U.S. corporate tax rate is among the highest in the world ad competitively out of step with other countries, like Canada, that are lowering theirs. But the idea behind reform is not to reduce the overall tax burden on corporate America. Tax avoidance is a skill so valued by management that more than half of American corporations no longer pay significant taxes anyway, according to the General Accountability Office.
Rather, reform will attract (taxable) capital investment — and thereby jobs at better wages — here at home. In the past decade 46 corporate headquarters have left the U.S., and trillions of dollars in profits remain offshore. As finance professor Minir A. Desai writes in this summer’s Harvard Business Review, “High corporate taxes divert capital away from the U.S. corporate sector and toward noncorporate uses and other countries. They therefore limit investments that would raise the productivity of American workers and would increase real wages. This is the cruel logic of a corporate tax in a global economy — that its burden falls most heavily on workers.”
At the state level, of course, Roy Cordato is pushing for more than just reform. He’d like to see North Carolina’s corporate income tax repealed.