Cutting Corporate Taxes Will Spur Economic Growth

America was built on the ability to out-compete and out-innovate the rest of the world. Both of these advantages are under threat with excessive taxation and tax compliance that fills volumes of books and billions of hours of tax preparation.  As a result, job creation has suffered and any economic recovery is threatened.

The corporate tax rate of 35 percent (the second highest in the world) is an example of an outdated tax system and a burden this country can no longer bear.  This rate is higher than every one of America’s major European trading partners and is higher than China or Canada. In fact, since 1992, the average OECD combined statutory rate has been lower than America’s and it has continued to fall. Today, it is nearly 10 percent lower (25.1 percent) than America’s 35 percent. Add in the state and local taxes that U.S.-based companies pay and the gap widens even further.

Combine the second highest corporate tax rate with the $6 billion and 160 billion hours companies spend on tax compliance each year and it’s a recipe for disaster. At a time of economic stagnation, America continues to maintain a tax code that discourages businesses from investing in the U.S.  While other countries have worked to lower their tax rates and attract investment, America has kept their tax rates the same, and global businesses have taken note. Over the last few years, foreign direct investment in the U.S. has dropped significantly.

A common-sense way to address this program is to clean up the tax code and lower the rate. If America simplifies the code and broadens the base, we can lower the rate to better compete with our major trading partners. A more competitive rate will bring investment, and more importantly, jobs, back to the U.S.  Support to lower the tax rate is gaining steam on Capitol Hill.  According to Reuters, “In a move that shifts the tax reform and deficit debate, Dave Camp, chairman of the tax-writing House Ways and Means Committee, called for cutting the top tax rates for individuals and corporations to 25 percent from 35 percent.”  Senate Republicans have offered a similar rate, indicating that it would create 5.3 million jobs over the next decade.

If Republicans and Democrats are serious about growing the economy, the first task should be enacting this pro-growth plan now.