Though Republicans and Democrats are girding for a long battle over taxes and spending in the fiscal cliff negotiations, one of the business community’s most sought-after reforms actually enjoys bipartisan support: cutting corporate taxes.
At 35 percent, the U.S. corporate tax rate is among the highest in the developed world. It’s also one of the most crippling policies for U.S. business, according to Elaine Kamarck, a lecturer in public policy at Harvard University’s Kennedy School and former member of the Clinton administration.
“The fact that we now have the world’s highest corporate tax rate means that we are now uncompetitive with our trading partners,” said Kamarck, in an interview with The Daily Caller News Foundation. “We’re looking at a situation where the tax status of our big corporations is actually hurting their prospects for increasing job growth in the United States.”
The high corporate tax rate encourages companies to move their headquarters to countries with more favorable taxes, taking American jobs overseas, said Kamarck.
“That is not a labor price issue, that is a tax issue,” she said. “When the headquarters leaves for Dublin or some other place in Europe, or some place in Canada, they take a lot of jobs with them, and those tend to be high paying jobs.”
Kamarck is co-chair of the RATE Coalition, a group of big businesses that want Congress to take on comprehensive tax reform. The coalition’s sole issue is lowering the U.S. corporate tax rate, which is less competitive than France, Japan or Mexico.
It’s an issue that both sides of the political aisle agree on — at least in theory. Both the Republican and Democratic campaign platforms included promises to reduce corporate taxes. President Obama expressed support for lowering the corporate tax rate during the first presidential debate:
“Governor Romney and I both agree that our corporate tax rate is too high, so I want to lower it, particularly for manufacturing, taking it down to 25 percent,” he said.
A comprehensive tax reform package that included corporate tax cuts could be made revenue neutral if it also closed loopholes in the tax system, said Kamarck.
“The White House has said that a lowering of the corporate tax rates should be paid for by closing some tax loopholes or tax expenditures,” she said.
Reforming the prohibitively high corporate tax rate is government’s best option for improving the U.S.’s economic outlook, she added.
“There are very few tools in the tool kit that government leaders have to produce jobs … and this is one clear way that you could establish greater economic growth and therefore jobs,” she said.
If Congress and the president reach any sort of compromise during the fiscal cliff negotiations, corporate tax reform should be one of the least contentious sticking points.
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