Who says that President Obama is not a big believer in American exceptionalism. Under his watch the United States has surpassed Japan to become number one in a new category, we now have the highest corporate tax rate in the entire world.
To be fair, the reason we went from number two to number one is that Japan has announced that it will cut its corporate tax rate by five percentage points.
The Cato Institute developed this chart which shows KPMG data on corporate tax rates in the Organization for Economic Cooperation and Development (OECD) for 2010, and the new lower rate for Japan. With the Japanese reform, the average rate in the OECD will be 25.6 percent. That means that the 40 percent U.S. corporate tax rate is 56 percent higher than the average of wealthy-nations.
Most fiscal experts agree that cutting the U.S. corporate tax rate is a high priority, and President Obama’s fiscal commission endorsed the idea.
The U.S. corporate tax is a patchwork of overly complex and inefficient provisions that creates perverse incentives for investment. Corporations engage in self-help to decrease their tax liability and improve their bottom line. Moreover, corporations are able to minimize tax through various tax expenditures inserted into the tax code as a result of successful lobbying.
Without reform, it is likely that U.S. competitiveness will continue to suffer. The results of inaction are undesirable: the loss of American jobs, the movement of business operations overseas, reduced investment by foreign businesses in the U.S., reduced innovation and creation of intellectual property in the U.S., the sale of U.S. companies to foreign multinationals, and a general erosion of the corporate tax base.
Reform of the corporate tax structure should include the following:
Establish single corporate tax rate between 23 percent and 29 percent. Corporate tax reform should replace the multiple brackets (the top being 35 percent), with a single bracket as low as 23 percent and no higher than 29 percent.
Today the President met with twenty corporate CEOs to find out how to get the “pilot light” of the economy lit. I could have saved the president lots of time. By cutting the corporate tax rate and making the US more enticing to corporate enterprise, the economy will begin to expand once again. Right now the economy is being crushed under the heavy burden of over-taxation.