Corporate Tax Reform Should Focus on Rate Reduction

Curtis Dubay / May 09, 2011

The United States will soon have the highest corporate tax rate in the world once Japan enacts its pledge to cut its rate. This dishonorable distinction is driving both Washington lawmakers and the business community to finally call for long-overdue reform.

Politico reports that Treasury Secretary Timothy Geithner will release the Obama Administration’s plan for corporate tax reform in the coming weeks. There are many outlines the plan could take, because there are so many problems with the corporate tax code that need fixing. But no matter what form the plan takes, its centerpiece should be a greatly reduced rate.

The high rate is the biggest factor driving businesses to locate new investment in other, more competitive countries. This is costing the U.S. jobs and slowing economic growth.

The Administration’s plan should lower the corporate tax rate so it is on par with the average in other industrialized nations in the Organization for Economic Cooperation and Development to put the U.S. on equal footing with its global competitors. That average stands at 25 percent today, well below the U.S. rate, which is above 39 percent (35 percent at the federal level plus the almost 5 percent on average that states tax businesses). (more…)