The global marketplace is an increasingly competitive arena in
which countries are making tax concessions in order to attract
multinational corporations. In order to stay competitive with
the rest of the world the United States must take a closer look
at their taxation laws and amend them as conditions warrant.
The article Overhauling the Old Jalopy by The Economist (No
author identified) is about the increasing problem of high
corporate taxes in the United States versus countries overseas.
Hank Paulson the treasury secretary recently held a summit in
Washington D.C. to address the fact that "our system is visibly
lacking behind the best practices in the rest of the world." The
article states that "If headline tax rates were all that
mattered, America would be an unattractive place for companies
to locate." In fact America's corporate tax rate of 35 percent,
39 percent when state tax is added is the second highest in the
Organization of Economic Cooperation and Development (OECD).
These high tax rates make a significant difference in where
multinational corporations record profits and business is done.
The problem facing those who want to overhaul our current
corporate tax system is the current political climate and trends
towards reducing the middle class tax liability while increasing
tax liability for the rich. The last thing the American public
wants to see is lower taxes for multinational corporations.
However the lack of the American people's willingness to accept
a corporate tax cut lies in a lack of education. A study
conducted by Kevin Hassett and Aparna Mathur of the American
Enterprise Institute showed that a 1 percent increase in
corporate tax rates result in a 0.8 percent cut in manufacturing
workers wages. The study showed that in reality high corporate
taxes are taking "a toll on the common man."
We now live in a truly international marketplace in which the
world has never seen the likes of before. In this marketplace
the competition is fierce for multinational corporations to find
ways to cut costs and stay ahead of the competition. This
article brings to light a facet of the new international
marketplace that many don't think of, taxation. With it becoming
easier than ever for corporations to move across international
lines, the tax code may become a major player in where a company
decides to headquarter itself and declare profits. If the United
States does not stay competitive with the rest of the world we
may start to see corporations move their headquarters off our
shores to reduce their tax liability. As countries lower
corporate tax rates to attract more international business for
example China at 25 percent and Ireland at 13 percent,
(Overhauling the Old Jalopy by The Economist) the United States
become increasingly less attractive to both investors and to
corporations who are already here.
Hopefully our citizens and politicians will soon realize that
there are more to tax cuts than what we are immediately exposed
too, and that to continue to ignore the fact that US corporate
tax rates are well above the standard set by the rest of the
world will do nothing but stifle growth in our country. In order
to attract and keep business in the United States we must make
business attractive in the United States.
John Schlismann has an interest in
international affairs and how they relate to the United States.
For more information about international tax rates and taxes in
general, go to the The Tax Foundation Web site: http://www.taxfoundation.org/.
