The Corporate Tax Code Distorts Our Economy

“Why do unpatriotic politicians continue to scare American institutions away?”

You’re not likely to hear that question asked during this election cycle. Instead you’ll hear about “Candidate XYZ supports tax breaks for companies that ship jobs overseas.” But those commercials turn the narrative on its head. Thanks to the US corporate tax code, multinational companies based in the United States will face the punitive US corporate tax rate if they attempt to repatriate their international income back into the United States. This prevents capital from coming into the US. This motivates companies to move operations out of the US. It’s the punitive tax code that “ships jobs overseas.”

Or across the border.

Cato’s Dan Ikenson blogs about the latest example: American fast food franchise Burger King, looking to purchase a Canadian franchise and move its corporate headquarters north of the border. Ikenson notes some very discouraging policy trends on top of the very high US corporate tax rate of 35%:

According to several reputable business-perception indices, the United States has slipped considerably over the past decade in a variety of areas that directly impact investment decisions. (See “What Really Drives the Investment Decision” begininng on page 15.) Out of 142 countries assessed in the World Economic Forum’s Global Competitiveness Index, the United States ranks 24th on the quality of total infrastructure; 50th on perceptions that crony capitalism is a problem; 58th on the burden of government regulations; 58th on customs procedures; and 63rd on the extent and effect of taxation. Meanwhile, uncertainty over energy, immigration, trade, tax, and regulatory policies continues to deter investment and even encourages companies to offshore operations that might otherwise be performed in the United States.

Can someone please explain to me how this is good for jobs-jobs-jobs in the United States?

It’s high time policymakers cut the corporate tax rate, thus giving American wage earners a likely raise and giving our country more wealth and more work opportunities. Advocating for a lower corporate tax rate is not the same as advocating crony capitalism and corporate welfare: those activities distort and ultimately harm Americans. Advocating for a lower corporate tax rate means advocating for a stronger US economy.


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