COMMENTARY | Sunday marks the day when the United States accepts the crown for the corporate tax king of the industrialized world. No, it's not an April Fools' joke. When Japan officially chops its rate down to 36.8 percent Sunday, the U.S. becomes the baron of corporate redistribution, with its 39.2 percent rate (including state taxes).
The milestone has sparked a heated debate in Congress, as Republicans jettison President Obama's proposed rate of 28 percent, which would purportedly be offset with $350 billion in new taxes. GOP lawmakers have countered with a proposal that would slash the corporate tax rate to 25 percent, absent the burden of higher income taxes.
The Republican argument of the tax debacle touts the jobs and investment angle, indicating that a lower corporate tax will allure foreign investment and stimulate job growth -- which, in turn, will expedite economic recovery. Sen. John Barrasso (R-Wyo.) purported just how un-competitive the U.S. corporate tax environment is, when stacked up against global standards.
"Even Russia, at 20 percent, and China, at 25 percent, have lower rates than America does," Mr. Barrasso averred. "The difference in tax rates means American companies are trying to compete with one hand tied behind their backs." Moreover, Germany cut its rate by 22 points and Canada shaved its rate by 13 points. That hoists the U.S. rate far atop the global average, which currently hovers around 25 percent.
The Business Roundtable, an association of America's top business executives, echoed Barrasso's foreboding, pointing to a recent measure by England to slash their corporate tax from 28 percent to 22 percent, which government officials branded as "an advertisement for investment and jobs in Britain." The Business Roundtable's Tita Freeman believes the U.S. must replicate what countries like England are now doing, as she added, "Comprehensive tax reform is an imperative for the U.S. if we are going to remain a leader in the worldwide economy."
The implications of a lower corporate tax rate are fairly lucid. Analysts at the Heritage Foundation have done extensive research on the topic, and concluded that if Washington were to trim the corporate tax down to 25 percent, Americans would see a dramatic spike in wealth. After-tax income, Heritage affirmed, would boost by nearly $2,500, while the economy would generate 581,000 jobs per year over the next ten years.
Of course, every good story is not without irony: despite achieving the highest corporate tax rate -- an indicative sign of socialist sentiment -- the U.S. has somehow been branded as the capitalistic capital of the world.