Government Bytes


New Coalition Hopes to Turn Agreement Into Action On Corporate Tax Reform

by Brandon Greife / /

Agreement is hard to come by in Washington, but on at leastone issue the parties seem to be in agreement – the need to lower America’scorporate tax rate.

President Obama has repeatedly stated support for the idea. “Ifthere are ideas whereby we can lower the corporate tax rates in a way that doesnot massively add to our deficit,” saidObama in 2008, “ . . . that is something that we would be very interested in.”Referring to such reforms as a “win-win for everybody.”  

Likewise, the House-passed Republican budget (which witheredin the Senate) would have cut the corporate tax rate to 25 percent, down fromtoday’s 35 percent.

Despite the widespread agreement, corporate tax reform hasbeen unable to find a footing in Washington. “Tax reform has been like theweather, everyone talks about it but no one does anything about,” opinedPat Heck, a former top aide to the Senate Finance Committee.

In an attempt to get the ball rolling on something everyonebelieves to be a good idea, a broad coalition of major businesses has launchedan effort to lower the U.S.’s sky-high corporate tax rate. The coalition, Reducing America’s Taxes Equitably,known by its acronym RATE, hopes to make Washington see the powerful economiceffects that a reduced rate would bring.

NTU has long argued that America’s current tax system exertsa tremendous drag on the economy, piling heavy rates and double taxation ontothe backs of our would-be job creators. A recent report by top accounting firmErnst and Young found that the overall effective tax rate on corporate earningsthat are retained and reinvested in the firm is 42.1 percent – one of thehighest among developed nations. In fact, according to “Paying Taxes 2011,” a study jointlypublished by the accounting firm PricewaterhouseCoopers and the World BankGroup, the United States now ranks an embarrassing 124th out of 183countries worldwide in total tax rate faced by a typical corporation.”

And while others are taking steps to make their corporaterate more competitive in an increasingly globalized economy, America has donelittle. Since the Tax Reform Act of 1986 lowered the top federal rate from 46percent to 34 percent (subsequently raised to 35 percent in 1993) the corporateincome tax rate has remained unchanged. On the other hand, 30 out of the 34nations in the Organization for Economic Cooperation and Development, havelowered their statutory corporate rates since 2000.

Moreover, the United Kingdom is scheduled to lower their rateand the Japanese had proposed a rate decrease until the tsunami disrupted theireconomic plans.

Given these trends it is clear that America is quickly beingleft behind. Our high corporate rate is deterring businesses from locatingtheir production facilities on our shores, creating disincentives for continuedinvestment, and hurting workers through reducing employment opportunities andlowering wages.

"For the sake of our national economic and strategicfuture, it’s vital that we create a more simplified corporate tax system thatis fair, transparent, and most of all, pro-growth,” saidRATE Co-Chair James Pinkerton. NTU could not agree more.

For more on the RATE Coalition we urge you to check outtheir website by clicking HERE.