Richard Rahn’s Washington Times column makes several key points about corporate taxation, including the fact that excessive taxation of capital (the corporate income tax being just one example) is extremely foolish such taxes impose the most damage – per dollar collected – when compared with other forms of revenue. To add injury to injury, the U.S. corporate income tax is especially destructive in a competitive global economy.
The majority of taxaholics are particularly addicted to the most destructive taxes, being the taxes on capital. Up to a point, perfectly sound arguments can be made for taxing tobacco, alcohol, gasoline, etc. However, taxing capital at high rates or double or triple taxing is nothing more than self-destruction. Capital is what business people use to hire workers and purchase new plants and equipment. Taxes on corporations, capital gains, dividends and interest are primarily taxes on capital – and the heavier the tax, the fewer new jobs. In a new report published by the Cato Institute, international tax experts Duanjie Chen and Jack Mintz at the University of Calgary in Canada state that the U.S. “statutory corporate income tax rate is one of the highest in the world…which harms the economy and encourages companies to shift investment and profits abroad to lower-tax jurisdictions.” (See attached chart.) The authors estimated effective tax rates for 80 countries. (Effective tax rates take into account statutory tax rates plus tax base items that affect taxes paid on new investment, such as depreciation allowances.) They found that the “U.S. effective corporate rate is 35.0 percent, which is much higher than the 80-nation average of just 18.2 percent.”
For a more detailed explanation of why the corporate income tax should be reduced, see the very first video produced by the Center for Freedom and Prosperity. It was supposed to be a test for internal purposes, and the production values are not as advanced (hopefully) as more recent videos, but the message is worth sharing.