The Corporate Tax Conundrum

What Corporate Tax for Europe?

A lower corporate tax rate would weaken this justification.

Pass the payroll tax cut without delay.

In the 1980 s and early 1990 s, centralized wage setting agreements were dissolved and the Swedish government cut personal and corporate tax rates.

Instead of cutting proven tax incentives for business investment, the US should offset at least some of the revenue losses from a lower corporate tax rate by raising tax rates on corporate shareholders.

President Bush's tax cut, however, squandered the surplus.

Indeed, cutting these items to pay for a reduction in the corporate tax rate could end up increasing the tax on corporate economic activity in the US.

Eliminating special interest loopholes, like tax breaks for oil and gas, or for corporate jets, would not yield enough revenue to pay for a meaningful rate cut. And curtailing accelerated depreciation, the manufacturing production deduction, and the R D tax credit which account for about 80 of corporate tax expenditures would involve significant tradeoffs.

Eliminating special interest loopholes, like tax breaks for oil and gas, or for corporate jets, would not yield enough revenue to pay for a meaningful rate cut.

Soaring oil prices will cut corporate profits and household purchasing power.

Finally, in addition to extending Bush s tax cuts, Romney promises an across the board 20 reduction in marginal personal income tax rates and a significant cut in the corporate rate to encourage businesses to hire more workers.

As a consequence of the ensuing tax competition, corporate tax rates have fallen to 15 25 in most European countries.

The resulting revenue loss could be offset by raising the corporate tax rate.

The Supreme Court even found a corporate income tax law unconstitutional in 1909.

These revenue losses could be offset by curtailing so called corporate tax expenditures deductions, credits, and other special tax provisions that subsidize some economic activities while penalizing others and broadening the corporate tax base. Both President Barack Obama s plan for business tax reform and the Simpson Bowles deficit reduction plan propose reducing such expenditures to pay for a reduction in the corporate tax rate.

The tax cut has probably been saved rather than spent.

Reducing the tax rate for companies substantially, while eliminating targeted business tax preferences and broadening the corporate tax base, would increase both investment and workers wages.

In order to survive international tax competition and thus be able to rely on corporate taxes as a source of revenue Japan s corporate tax rate should be lowered in the long run.

Moreover, pension funds, retirement plans, and non profit organizations, which receive about 50 of all corporate dividends, do not pay tax on these earnings, and would benefit from a lower corporate tax rate.

That is why countries around the world have been cutting their corporate tax rates.

Maryland collected 1 billion in corporate income tax revenue, the most in the region.

Virginia has the lowest corporate income tax by far of the three jurisdictions (all of which have flat corporate rates) at 6 percent.

That had been accomplished by widening the tax base, improving administration efficiency, reducing corporate income tax, introducing a personal income tax of 10 per cent and keeping value added tax at 10 per cent.

A 15 tax would raise 300 billion. The choice of tax rate would be part of the negotiation over how far to reduce the overall US corporate tax rate.

Greenspan s irresponsible support of that tax cut was critical to its passage.

BERKELEY The United States now has the highest statutory corporate income tax rate among developed countries.

Moreover, a high corporate tax rate is an ineffective and costly tool for producing revenues, owing to innovative financial transactions and legal tax avoidance mechanisms.

These so called inversions would reduce these companies total tax bill by allowing them to escape from the United States uniquely unfavorable corporate tax rules.

It is still not clear what led Greenspan to support the tax cut.

Third, if you're an American manufacturer, you should get a bigger tax cut.

For example, a French firm that invests in Ireland pays the 12.5 Irish corporate tax but is then free to repatriate the after tax profits with a tax of less than 5 .

Economy Sunrise s strong tax base includes Sawgrass Mills, Sawgrass International Corporate Park, IKEA and other commercial development.

Yet remarkably, Bush asked for, and got, a reckless tax cut for the rich.

Reducing these fees would, in effect, be a tax cut for the world's poorest.

More promising is the 150 billion tax cut that the US Congress recently enacted.

(If one worried about double taxation, one could allow a credit for corporate taxes on individual tax returns.)

While gains from fundamental tax reform say, replacing the current tax system with a broad based consumption tax are large, on the order of 0.5 1 percentage point per year of economic growth for a decade, corporate tax reform would also boost growth.

And curtailing accelerated depreciation, the manufacturing production deduction, and the R amp D tax credit which account for about 80 of corporate tax expenditures would involve significant tradeoffs.

George W. Bush s proposals for a massive tax cut are risky gambling on large future budget surpluses that might never appear, and gambling that a sharp tax cut won t trigger a jump in interest rates.

There has been no tax cut of any significance, and pension reform is still waiting.

Of course, some believe an income tax cut is precisely what the French economy needs.

Second, a large tax cut hampers the ability of the Fed to ease interest rates.

In 1999, when Laar became Prime Minister again, he abolished the tax on corporate profit, which was harming entrepreneurship.

Most countries that reduced their corporate tax rates have followed this path, while the US has done the opposite.