December 16 2010

One is the Loneliest Number

Hadley Heath

Sometimes it's good to be number one.  But not when it comes to highest corporate tax rates of all OECD countries.  That's where the United States is now, as Japan has recently announced that it is slashing its rate by 5 percent.  Check out this graph, from Chris Edwards at Cato:

 

I distinctly remember a story Meg Whitman recounted in one of her campaign speeches this fall.  She said that Texas Gov. Rick Perry said he liked to go hunting in California.  When she asked him what he hunted in the Golden State, he said that he went hunting for companies to bring to Texas, where they would enjoy a better business climate.

I don't know if we should expect to see any Japanese hunters in the U.S., looking for corporations to move overseas, but I know that being at the top of the corporate tax rate list is not a good place to be.  If we are worried about American businesses having to compete with businesses abroad, we should keep in mind the disadvantage they face from high tax rates.  With a cut in corporate tax rates in the U.S., we could expect to see more investment in America and even an increase in real wages. 

And guess why Japan is cutting their rate?  They want more job creation.  Hm, that'd be nice.

But unfortunately, our policymakers are too hung up on a different tax battle at the moment.

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