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U.S. Corporate Taxes and Reform
The current U.S. corporate income tax system has many flaws and with the correct changes the United States budget deficit could transform into a surplus. There are two clear flaws in the current corporate income tax policy. The first is the high tax rate corporations pay in the U.S.; taxes on corporate income are currently at 35%. This burden causes businesses to avoid operating here and the cost is thousands of domestic employment opportunities. The next issue with our current corporate income tax system is the narrow corporate tax base. Our tax base is greatly reduced by loopholes, tax expenditures and tax planning (Gutman 700). The loopholes and expenditures create opportunities for companies to reduce their overall effective tax rate. Changes need to be made to the complicated tax structure and high rates. These flaws are greatly diminishing our country’s tax revenue.
The plan to fix our current corporate tax system sounds simple, we need to lower the corporate tax rate and increase the tax base. These changes are very difficult to implement in a democratic nation with a steadily increasing large national debt. With the nation’s current debt any changes should be revenue neutral to the United States. This creates a pessimistic view that if the corporate tax rate is reduced someone will need to pick up the tax burden to offset the revenue lost by the reduction. The current U.S. tax rate is 35% and the average corporate tax rate in countries around the world is about 23% (“Corporate Income Tax”). Looking at the countries with the ten largest economies in the world their average corporate tax rate is close to 27% (Bergmann). These averages, derived from the global corporate income tax rates provided by PricewaterhouseCoopers LLP, help make an argument that a rate to incentivize corporations to operate and report their earnings in the U.S. would be 22.5%. This drastic cut will also help make the next step of
The current U.S. corporate income tax system has many flaws and with the correct changes the United States budget deficit could transform into a surplus. There are two clear flaws in the current corporate income tax policy. The first is the high tax rate corporations pay in the U.S.; taxes on corporate income are currently at 35%. This burden causes businesses to avoid operating here and the cost is thousands of domestic employment opportunities. The next issue with our current corporate income tax system is the narrow corporate tax base. Our tax base is greatly reduced by loopholes, tax expenditures and tax planning (Gutman 700). The loopholes and expenditures create opportunities for companies to reduce their overall effective tax rate. Changes need to be made to the complicated tax structure and high rates. These flaws are greatly diminishing our country’s tax revenue.
The plan to fix our current corporate tax system sounds simple, we need to lower the corporate tax rate and increase the tax base. These changes are very difficult to implement in a democratic nation with a steadily increasing large national debt. With the nation’s current debt any changes should be revenue neutral to the United States. This creates a pessimistic view that if the corporate tax rate is reduced someone will need to pick up the tax burden to offset the revenue lost by the reduction. The current U.S. tax rate is 35% and the average corporate tax rate in countries around the world is about 23% (“Corporate Income Tax”). Looking at the countries with the ten largest economies in the world their average corporate tax rate is close to 27% (Bergmann). These averages, derived from the global corporate income tax rates provided by PricewaterhouseCoopers LLP, help make an argument that a rate to incentivize corporations to operate and report their earnings in the U.S. would be 22.5%. This drastic cut will also help make the next step of
Cited: Bergmann, Andrew. "World 's Largest Economies." Chart. CNNMoney. Cable News Network, n.d. Web. 5 July 2013. . "Corporate Income Tax: Headline Rates for WWTS Countries." Chart. PWC 's Worldwide Tax Summaries Online. PricewaterhouseCoopers International Limited, 1 July 2013. Web. 7 July 2013. . Gutman, Harry L. "How to Think About Real Tax Reform." Tax Notes (2012): 695-708. Print. Linebaugh, Kate. "Firms Keep Stockpiles of 'Foreign ' Cash in the U.S." The Wall Street Journal. Dow Jones & Company, 22 Jan. 2013. Web. 6 July 2013. .