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Archive for August 13th, 2009

I explain why the Obama Administration should not export America’s wretched internal revenue code to other nations that have better tax policy and more respect for human rights.

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It is somewhat disconcerting that every single European welfare state – even France and Sweden – has a lower corporate tax rate than the United States. But embarrassment is the least of the problems. The real issue is that a high corporate tax rate means it is more likely that jobs will migrate to nations that don’t treat companies as milk cows to nourish big government. As Investor’s Business Daily explains, a high corporate tax rate means less investment:

Four more developed nations have cut their corporate tax rates this year. Yet the U.S. sticks with second-highest corporate rate among OECD nations. This puts us at a competitive disadvantage. Only Japan, at 39.54%, has a higher corporate rate than the U.S., which at 39.1% is a bit lower than last year but still far higher than the average (26.29%) of the 30 Organization for Economic Cooperation and Development nations. That average was brought down from 26.55% after the Czech Republic, Sweden (yes, the country where soft socialism has supposedly been perfected), Canada and South Korea cut their rates. …High corporate rates are unwanted — or should be unwanted — because they put a drag on a nation’s capital stock. An economy needs investment to increase jobs and pump productivity. High corporate tax rates repel rather than attract foreign companies and can even send domestic firms overseas. Capital flows easiest where the resistance is light. This is not our fantasy but an outcome that’s been observed in the real world. In 2003, economists Ruud de Mooij and Sjef Ederveen found that if a country cuts its corporate rates by a single percentage point, it can expect to boost capital investment by about three percentage points.

The Center for Freedom and Prosperity’s first video also addressed these issues. And while the production values and quality leave a bit to be desired, the message is very timely.

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