Theory Post

The debate on what to do about the corporate tax is very much a bipartisan issue. Therefore both sides of the debate will have come to a compromise on the issue. The conservative side of the debate would like to make the tax policy as attractive as possible to businesses that allow American companies to compete internationally. The liberal side of the debate wants to allow American Corporations to be competitive in the global market as well, but they also want higher taxes and more regulations on corporations to assists government spending that help the people. The conflict arises because one side believes little government regulation of business is necessary for a health economy. While the other side feels that more regulation of business that protects the America people is necessary even at the cost of limiting economic growth.
I inherently believe that a more conservative view of less government control in business in the solution to the debate over corporate tax. Although liberal efforts in closing tax loopholes, that favor foreign businesses operations, to bring home jobs is a good for the economy.http://www.washingtonpost.com/wp-dyn/content/article/2009/05/04/AR2009050403256.html The problem, which I have mentioned throughout my blog, is the current corporate tax rate is too high for U.S. business to operate domestically and still compete with the rest of the world. If both sides could agree to lower the corporate tax, American Companies would able be to thrive domestically in global market. http://www.heritage.org/research/Taxes/wm1891.cfm Conservatives would be satisfied as U.S. corporations remain competitive. While at the same time tax revenues, currently sheltered in foreign tax havens, would be reaped by the government for spending which would satisfy liberals.http://www.businessweek.com/investor/content/jul2009/pi20090716_980847.htm

A Solution

In my last blog I touched on the problems of Obama’s new tax proposal that closes tax loopholes that help American Business earn higher profits and stay competitive. These loopholes are put in place to deter business from outsourcing production overseas. The problem is American Corporations will not run their companies in an unfriendly tax environment, such as America with the second highest corporate rate the world. The only way the Obama’s new proposal will work is if the current corporate tax rate is cut in half to allow our corporations to compete internationally. Also tax incentives for corporations that operate domestically, already in Obama’s proposal, will attract more businesses back to America.
Offering a more competitive business environment will bring home and start up more business operations in the U.S. Unemployment in our cities will go down, as more jobs will be offered domestically. As we produce more in the U.S. we will decrease our imports and increase our exports, which is crucial in helping the economy. Tax revenues previously paid to foreign governments, that harbor American corporations, will be incorporated into America’s tax revenue. Although corporations will be tax at lower rates than before, the government will still generate more tax revenue. Seeing as currently an overwhelming majority of American Corporation’s taxes on profits go to foreign countries. Simply closing loopholes in our tax code will not help the economy. Our government has to offer a competitive business environment with lower corporate tax rates as an attractive alternative to foreign markets for U.S. Companies.

Making Things Worse

Obama’s new tax proposal to close tax loopholes on multinational American based companies will do little to help the economy. Obama’s wishes to add new regulations to the international tax code to raise more money to aid the massive spending in Washington. The proposal plans to crackdown on companies taking advantage of foreign tax deductions and says it will bring more jobs back to the U.S. I think this tax new policy will cause an unintended loss of domestic business and jobs.
The business community has put up much opposition to Obama’s new proposal, and experts fear that many companies will leave to compete in foreign markets to avoid Obama’s new tax code. Steve Ballmer Chief Executive Office of Microsoft said, “It makes U.S. jobs more expensive, we’re better off taking lots of people and moving them out of the U.S.” If Microsoft the most competitive U.S Company leaves the U.S. to continue to thrive, what companies will stay.
The loopholes Obama insists on closing in the tax code, to gain more tax revenue, were put in place to allow companies to be competitive in the global economy. U.S. Corporations are one the few countries that pay taxes on foreign earnings to where the money was earned and also when the money is sent back to the U.S. These loopholes were designed to offset the burden of a double taxation policy and to allow corporations to be more competive globally. Furthermore I fail to how increasing taxes on foreign operations will bring home more jobs. . We cannot expect our corporations to compete against other foreign multinationals, selling the same products in the same markets with more favorable tax policies. America’s Corporations, that secure our financial future, will not operate under unfair tax conditions. Corporations will be forced to find other countries to continue to thrive and will leave taking their profits and jobs elsewhere.

Analysis Of Corporate Tax

Lower U.S. corporate tax rates is fundamentally apart of the free market conservative agenda. The conservative view is that a more attractive corporate tax policy increases investment, yields larger capital gains, and offers more jobs domestically. Less government control of business in the free market system provides more opportunities and higher standards of living. Lower taxes give more incentive to corporations to earn, save and invest. The liberal opposing ideology believes in more government interference, with higher taxes, in business to curb private interests to protect the best interest of the people. Heavy tax policies allow for more government spending in welfare programs that protect the people. Although more taxes generate more money to help the people, high taxes restricting effects on growth in the economy outweigh the benefits that people receive from it.
In context of the debate on the corporate tax, the liberal stance does not protect the best interest of the people. Instead of keeping jobs in the U.S. for citizens they are pushed away, with uncompetitive rates and tax policies, to other countries. Furthermore high corporate taxes always trickle down to harm consumers with higher prices and employees with lower wages. http://www.notoriouslyconservative.com/2009/06/obamas-multinational-tax-policy.htmlRestricting success and profitability of large corporations does not benefit the middle class citizen. Offering more job opportunities and higher wages benefits the average citizens and lessens the burden of the welfare system. Under the current tax rate the unemployment rate has reach up to almost ten percent. Corporations, in the globalized economy, are going elsewhere to find better investment and higher profits. http://www.cato.org/pub_display.php?pub_id=8382
If the government continues their policy of high taxes that constrict U.S Corporations there will be fewer companies left to tax and less tax revenue. Less corporations producing lowers the GDP, making it much harder to fill the ballooning deficit. http://www.youtube.com/watch?v=QSB_-g-GQCA The fed will have less tax revenue to spend in government programs helping the lower class and to cope with debt problems. Lower corporate tax rates that allow business to thrive domestically benefit the financial status of the nation more importantly the American people. Expanding business opportunities instead of limiting them will be the key in improving America’s future.

http://www.politicsdaily.com/2009/10/12/corporate-tax-laws-put-obama-in-a-bind/
http://www.heritage.org/research/Taxes/wm1891.cfm
http://www.law.stanford.edu/news/details/2882/Obama
http://www.nytimes.com/2009/10/10/opinion/10herbert.html?_r=2&adxnnl=1&adxnnlx=1255298642-G1jSgwC4ZSjCarrVMXf87A
http://www.businessweek.com/investor/content/jul2009/pi20090716_980847.htm
http://www.aei.org/event/1696
http://www.notoriouslyconservative.com/2009/06/obamas-multinational-tax-policy.html
http://taxvox.taxpolicycenter.org/blog/_archives/2009/10/8/4345224.html
http://www.allacademic.com/meta/p_mla_apa_research_citation/1/9/8/9/5/pages198955/p198955-2.php
http://www.cato.org/pub_display.php?pub_id=8382
https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=IIPF63&paper_id=290
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/04/AR2009050403256.html
http://money.cnn.com/2009/05/04/news/economy/obama_corporate_tax_proposals/
http://www.irishtimes.com/newspaper/finance/2009/1014/1224256613632.html
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4.7CIfqd5h0
http://blogs.wsj.com/washwire/2009/10/06/is-a-corporate-tax-overhaul-next/
http://taxprof.typepad.com/taxprof_blog/2009/08/us-corporate-tax-rate.html
http://robertreich.blogspot.com/2009/05/why-obama-is-taking-on-corporate-tax.html
http://www.politicsdaily.com/2009/10/12/corporate-tax-laws-put-obama-in-a-bind/
http://taxprof.typepad.com/taxprof_blog/2009/08/us-corporate-tax-rate.html
http://www.youtube.com/watch?v=QSB_-g-GQCA

Time to Act

In the current economic situation is important that America is able to attract investment. The extensive spending caused by our nation’s financial meltdown has put our nation into tremendous debt. Foreign investment would boost our economy helping to cope with our large deficit. Our rates are too high to attract foreign investment in global economy where businesses can shop around for the lowest rates easily moving capital from country to country. Economists tax experts are known to argue over just about anything, but the one area there is a general consensus is that America’s uncompetitive corporate tax rate puts the U.S at a disadvantage. Lowering the rate would bring more companies and jobs to America, attract more capital, and encourage more investment.
A great example of a country that lowered their corporate that translated into an economic prosperity is Ireland. At one point Ireland’s tax rate was up to 50%, and unemployment had reached 17% as a result. They were facing a stagnant economy and the people of Ireland were leaving to find better opportunities. A new political regime cut the rate drastically to 12.5%, since the tax cut unemployment has almost disappeared and Ireland has the fastest economic growth rate of any developed nation. Increased production in Ireland’s GDP ended up generating more tax revenue for the government than with higher rates. Politicians in Washington are hesitant to lower our corporate because they fear it will lower tax revenues. The World Bank issued reports stating as the global average corporate rates fell, tax revenues increased as result. America can afford to lower rates but we cannot afford to keep our companies at a disadvantage to the rest of world. The more time it takes for congress to lower the corporate tax rate, the more jobs and investment we lose to other nations.

Resisting Change

Around the world in many countries there has been a definite trend in lower corporate tax rates. Before the capital mobility of today, governments could tax corporations high rates and corporations were helpless. As recently as 1980 the average corporate tax rate in industrialized nations was fifty percent. As rates lowered, tax competition among nations issued a boom and growth in corporations. Even European welfare states saw the importance in lowering rate’s to facilitate a more competitive environment for corporations to thrive. All the nations that have lowered their corporate tax have seen boost in their GDP and their governments have seen more revenue as a result.
As the rest of world is acting on lowering the corporate tax, America is still stubbornly holding on to high corporate tax rates. The rest of world is reaping economic growth and higher production levels, while America is lagging behind and falling in more debt. Corporate America is not stupid either, more and more business and jobs are being sent overseas. In essence we are merely giving away capital to the rest of world by acting foolishly in our tax policies. American needs to follow the rest of world in the trend to lower corporate tax rates. Lower rates boost growth and also improve tax compliance, which generates more revenue for the state in the long run. We must liberate our nation’s corporations from these tax burdens, to allow them to expand and create more jobs. It is time for America to get on the same page as the rest of the world.

High rate's = little return

Obama’s new tax proposal on corporate tax suggests taxing all income on American corporations regardless if they repudiate income back to The U.S. This is intended to ensure that foreign income in U.S. Corporations is taxed back to the federal government. Instead to get around this new tax American companies with foreign operations will reform their business to foreign companies with American operations. Obama’s attempt to make it possible to repudiate income on foreign American corporations in reality is making it impossible.
Under these new proposals American business are incentivized by cheaper more competitive rates in foreign nations to leave the U.S. market place. The global market place has become too dynamic and competitive to expect corporations to operate under these tax policies. What needs to be done to correct problems with foreign business, is to allow for domestic corporations to compete in the global market. This can only be done by cutting the high corporate tax, giving corporations a chance to earn profit in the global market. Higher profits will generate more capital gains, which in return will return generates more tax revenue for the fed. America’s Corporations in today’s global economy will get around repudiating profits by reorganizing business structures to disassociate themselves from America’s tax system. We need to stop pushing away corporate tax revenue with uncompetitive tax rates. Lowering the corporate tax will generate more revenue through businesses that are willing to return taxes on income back to the U.S.

Corporate Tax rate's affects on the Economy

The high corporate tax rate on America corporations is hindering economic growth and expansion. The U.S corporate tax rate is among the highest in the World. Technologies and global infrastructure facilitates a globalization that allows jobs and investment to easily cross national borders. The high tax placed on American corporation puts the U.S. at a disadvantage in attraction business and production. We are currently seeing most of industry and Job going to foreign competitors with lower tax on corporations such as India, Ireland, and China. This hurts our Nation’s GDP, at a time when the current GDP already has no chance of covering our large deficit caused by the mass spending of the current political regime. Lowering the Corporate tax rate could bring more business, offering more jobs reducing the unemployment rate. Lowering rates will increase savings and investment, which is essential for economic growth especially in the current economic climate. Corporate tax reform on lowering the current rate could benefit the economy and potentially lead an exist out of our financial crisis.
To create more discussion and avoid bias on the debate it is important to address the opposing stance on the Corporate tax rate. The statutory tax rate makes it seem higher than other foreign markets, but corporate tax breaks and other loopholes in America actually make it lower than most developed countries. Also economists fear that corporate tax cuts’ detrimental effects on the deficit outweigh the economic benefits. Also lowering the corporate rate would force other taxes to go up or cuts in current government spending to make up deficit cost. Examine both sides of the argument to determine the correct decisions to be made on the US corporate tax rate policy. All input and further debate on the topic is greatly appreciated.