President Obama recently released his latest ploy to save the American economy. The trouble? It is same as the old plan. The so-called “American Jobs Act,” at a cost of $447 billion, is nothing more than the second part of the Obama stimulus which failed to result in anything but higher debt and deficits, crony capitalism and further economic stagnation. Luckily, while the Obama administration may be out of new ideas when it comes to reviving our economy the American people and American job creators are not.
Before we look for a way forward we must first come to a simple conclusion as to where we have come from. During the past twenty five years America’s economic position in the world has weakened, we have become less competitive in competing for jobs and growth and we have allowed for our tax system to become antiquated, overly complex and burdensome. Americans can no longer afford to be apathetic about our global competitiveness.
The first step we should take to reinvigorate our economy and improve our status as a magnet for jobs and innovation would be to significantly reform our corporate tax code. Closing loopholes, simplifying and reducing rates would free our nation’s job creators to start hiring again.
At 35 percent, America’s corporate tax rate is the second highest in the world. When companies look to open new branches or to relocate their headquarters, America can’t compete with countries whose tax rates make it easier, not harder, for businesses to succeed. And what is the result of such an unfriendly business environment? Jobs, capital and investment that could have helped the American economy sent overseas.
America is far behind the rest of the globe when it comes to corporate tax reform. Since 2000, 34 of the 30 nations within the Organisation for Economic Cooperation and Development have lowered their statutory corporate tax income rates. Even Japan, the nation with the highest corporate tax rate, is considering lowering their rate by five percent. But despite the numerous changes in technology, globalization and business development, the American corporate tax code has remained static for the past 25 years.
A reasonable corporate tax code that made America globally competitive would not just benefit CEOs and stock holders, but workers as well. Recent research has shown that 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 that 25 percent of the corporate tax is borne by workers.
The impact of a high corporate tax rate is increasingly apparent —the number of Fortune 500 Global headquarters in the U.S. and Japan has decreased 30 percent in the last 11 years. By closing loopholes in our corporate tax code while lowering the rate to make America more competitive, we have the chance to increase the corporate tax base by attracting companies to start in and re-locate to the U.S..
There are many areas in which we can and should halt the anti-growth policies of this administration but lowering and simplifying the corporate tax rate is the single best proposal to empower businesses of all sizes to reinvest in growth.