A Serious Wakeup Call
Guest column submitted by U.S. Senator Mike Crapo
The U.S. recently gained a disturbing world title. As of April 1, when Japan lowered its corporate tax rate, the U.S. now has the highest combined corporate tax rate in the world. The U.S. rate of 39.2 percent is well above the average global corporate tax rate of 25 percent. Taxing American job creators at a higher rate than anywhere else in the world sends the wrong message and runs counter to efforts to increase U.S. jobs and encourage businesses to expand in the U.S. Pro-growth tax reform that will generate investment, capital formation and job creation is critical to reversing the uncertainty and sluggishness in our economy and ridding our nation of job discouraging titles.
We would be hard pressed to create a more expensive to comply with, complex, unfair, burdensome, inefficient and anti-competitive tax code than our current code. Our nation's high corporate income tax rate and unique taxation of foreign-source income inhibits America's competitiveness. In addition to diverting resources that could otherwise go to job growth and discouraging business expansion in the U.S., high corporate tax rates have been found to depress wages. A recent report by the American Enterprise Institute cited a study showing that a one dollar increase in the corporate tax rate results in as much as a 49 cent decrease in wages. Researchers found that this decrease was a result of businesses passing on a significant part of the corporation income tax to workers through lower wages resulting from wage bargaining between the firm and workers.
Comprehensive tax reform, including lowering the corporate tax rate, would help make America the best place to start and grow a business and create jobs. The Heritage Foundation estimates that lowering the tax rate to 25 percent would generate 581,000 jobs in the U.S. annually in the next decade, and the U.S. real gross domestic product would rise on average by $132 billion per year.
Comprehensive tax reform promoting fiscal stability and economic growth must be part of the solution to our nation's economic problems. As a member of the National Commission on Fiscal Reform and Responsibility and as a member of the Gang of Six, I am continuing to work to advance proposals calling for pro-growth tax reform that lowers all tax rates, simplifies the tax code and reforms our corporate tax code to make U.S. businesses more competitive. The bipartisan plans would reduce the corporate tax rate to as low as 23 percent, ending the U.S. reign as having the world's highest business tax, consequently making American businesses more competitive on the world market.
Tax reform, such as this, focused on growth, through lowering rates and compliance costs, will better enable growth and job creation. Other countries are lowering their tax rates to attract companies and lasting jobs. In addition to Japan, Great Britain recently lowered its corporate tax rate to 24 percent, and Canada lowered its rate to 15 percent, joining 75 other countries that cut their corporate tax rates in a four-year period. Meanwhile, according to Ernst & Young, the U.S. lost 46 Fortune Global 500 company headquarters in the past 11 years. We need to get in the game and get in it quickly. Comprehensive tax reform promoting fiscal stability and economic growth must be advanced.
# # #
Word Count: 544