Pro-con: Should U.S. reduce corporate tax rates?

Congress and the administration need to unleash the dynamism of the private sector by adopting policies that will result in the economic growth necessary to reduce our deficits and put our citizens back to work. A reduction in the corporate tax rate to the average rate of other industrialized countries – about 25 percent – would eliminate a great disadvantage faced by businesses. The basic strategy is to achieve these lower rates by eliminating exemptions and other tax breaks, essentially broadening, flattening and simplifying the tax structure. It’s a daunting assignment, but with hard work and a focused effort, comprehensive reform can be accomplished within a year. At the same time, the United States must modernize its international tax system to enable American companies to compete more effectively in foreign markets. Comprehensive tax reform is a significant step we can take today that will improve American competitiveness, increase economic growth and put the nation on the path toward fiscal stability. – John Engler, Business Roundtable

Thanks to record profits, essentially zero short-term borrowing costs and extremely low effective tax rates, U.S. companies are sitting on more than a trillion dollars in cash. Further business tax breaks will do nothing to provide the real incentive that companies need in order to invest in our economy: strong consumer demand. Claims that federal business taxes are too high usually cite the nominal corporate tax rate of 35 percent. But what really matters is not the official rate, but how much companies actually pay, and by that measure corporate taxes are already very low. A study released in 2011 by Citizens for Tax Justice of 280 Fortune 500 companies found that their average effective tax rate over the previous two years was just 17.3 percent, less than half the statuary rate. Instead of cutting already low effective rates, corporate tax reform should focus on ending incentives to send profits and jobs overseas and making sure all companies pay their fair share. – Don Kusler, Americans for Democratic Action