Each month the accuracy and implications of the new unemployment data is debated in opinion columns, cable news shows and political campaigns. When even minimal job growth is recorded, pundits claim that we are now getting back on the right track. This short sighted outlook ignores our economy’s fundamental problems – such as our growing debt, sustained deficit and outdated corporate tax code – that will impact generations of Americans.
The Department of Labor’s announcement today that a far below expectation 120,000 jobs were created in the month of March further highlights our stagnant economy. To really spark economic growth, we need to make permanent policy changes that offer American companies a meaningful competitive advantage, and that begins with reforming the country’s archaic corporate tax code.
This month, the corporate tax rate in the United States became the highest in the world—39.2 percent when both state and federal taxes are included. This is over 50 percent higher than the average of the rest of the developed world.
The United States is used to being an economic leader, but our sky-high corporate tax rate is not only making it harder to reinvigorate our economy but is devastating our ability to compete on a global scale. Twenty-five years ago, the last time our corporate tax code was revamped, our nation was a leader in innovation and our business-friendly environment was a magnet for successful companies. However, since 2000, the United States has lost 46 Fortune Global 500 company headquarters, while countries like China and Korea have seen sizeable increases over that same period.
Like many aspects of our government, we can begin to fix the corporate tax code by making it simpler. Policymakers will greatly improve America’s ability to attract foreign investment and create jobs by removing burdensome red tape and closing loopholes that end up punishing small businesses – the true engines of our economy.
Reforming our corporate tax code won’t just benefit business owners; it will help the American workforce as well. Research shows workers bear a significant share of the corporate income tax in the form of reduced employment opportunities and lower wages. In fact, the U.S. Treasury Department estimates 75 percent of the corporate tax is borne by workers.
Moreover, lowering our rate to 25 percent, a level comparable with Canada and the United Kingdom, would lead to the creation of more than 500,000 jobs annually. And at this tax rate, a family of four could see its annual after-tax income rise by nearly $2,500 thanks to new employment opportunities and higher wages.
In February, the president announced a plan to reduce the top corporate tax rate to 28 percent. While it’s laudable that President Obama is beginning to discuss corporate tax reform, the top rate must be lower than 28 percent for America to be truly competitive internationally. Other developed nations are realizing the positive impacts a low corporate tax rate has on the overall health of their economy, and America must do the same.
A narrow focus on unemployment data and other indicators of incremental movement is simply short-sighted. We must look long-term in order to fix the problems that will plague the economic environment we pass down to our children and grandchildren. Comprehensive corporate tax reform that reduces rates, simplifies the tax code and closes unfair loopholes is necessary for our nation’s businesses to grow, thrive and hire.