NCPA - National Center for Policy Analysis

TAX ON U.S. CORPORATIONS HAMPERS GLOBAL COMPETITIVENESS

October 13, 2004

Tax policy developed in an era before there was a global marketplace now hinders the ability of U.S.-based corporations to compete with foreign businesses, say tax experts Rick Stamm and Rick Berry.

Some of the obstacles include:

  • American companies pay the highest corporate income tax as a percentage of income (45.5 percent) among the 30 countries in the Organization for Economic Cooperation and Development.
  • Firms incur substantial costs complying with complex rules for taxing foreign income, including broad anti-deferral provisions and a maze of foreign tax credit rules.

Ultimately, higher taxes mean higher capital costs, which reduce the competitiveness of U.S. corporations. When domestic exporters of products and services perform badly, American families suffer the economic consequences. According to Stamm and Berry:

  • Lower performance by U.S. corporations results in lower domestic job creation and economic growth.
  • A negative tax environment encourages the sale of U.S. companies to foreign multinationals and investment in foreign rather than domestic multinationals.

In addition, there is a strong incentive for U.S. corporations to reinvest income earned overseas into foreign operations rather than bringing it home where it would be subject to high U.S. taxes, explain Stamm and Berry.

Source: Rick Stamm and Rick Berry, "Time to Remove '60s-Era Obstacles that Hamstring Global Competition," Investor's Business Daily, October 5, 2004.

 

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