TIME TO CUT CORPORATE TAX RATES
August 10, 2007
The Democrat-controlled Congress wants to undo the Bush tax cuts, but the president is talking about more cuts to maintain this robust economy. It's another signal the White House is regaining its footing, says Investor's Business Daily (IBD).
- The United States has the second-highest corporate income tax rate, pegged at 39 percent, of all 30 nations in the Organization for Economic Cooperation and Development.
- We're far higher than the OECD average corporate tax rate of 31 percent.
- Our rate also exceeds the G-7 average of 36 percent.
And America's competitive disadvantage will soon worsen:
- Germany next year plans to reduce its corporate tax rate from 38 percent to 30 percent; Britain, China, France and Japan may also soon cut their rates.
- What's more, we're higher than we used to be; the 1986 tax reform act brought the U.S. corporate tax rate down from 46 percent to 34 percent, where it remained until the early to mid-1990s.
As a result, President Bush has shown interest in revenue-neutral legislation to make the U.S. tax code more competitive globally by reducing corporate taxes, says IBD. The details are as yet unsettled, but a background paper on business taxation and global competitiveness from Treasury Secretary Henry Paulson last month noted that special corporate tax provisions narrow the corporate tax base by roughly 25 percent. It was also suggested that if the tax base were broadened by removing these special provisions, the top corporate tax rate of 35 percent could be reduced to 27 percent with little if any change in revenue collections.
Source: Editorial, "Time To Cut Corporate Tax Rates," Investor's Business Daily, August 9, 2007.
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