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Posts Tagged ‘US corporate tax rate’


We’re Number 1, We’re Number 1 in Taxes

The USA now has the highest corporate tax rate in the World.  The sad point is when you add in State corporate taxes, the US was already had the highest corporate tax rate in the World.  This will hurt the US’s innovation, fewer people will invest in startups and fewer people will invest in new technologies.

The Marxists in the Administration will argue that this has no effect on whether companies invest in the US, or hire employees here, or whether people decide to start businesses in the US.  Of course, they have absolutely no evidence to back up their assertion.  In fact, all the evidence is against them.  But they will argue that we have to “invest” in our future.  This comes from an administration that believes

CONSUMPTION CREATES WEALTH.

No this is not a joke, but exactly (see Food Stamps) what the so called economists advising this administration believe.  Compared to these economists, the FLAT EARTH SOCIETY seems like they are part of the Enlightenment.  This doublethink is compounded by the idea that we are investing by giving money to Solyndra and other companies organized by Obama political cronies.  These “investments” are political investments by Obama, not investments in the US’s future.  Real investment by the government would be reducing the size and regulatory burden of the Government, see Austerity: Why it is Key for Both Short Term and Long Term Economic Growth.

Statist from both political parties will argue that the effective tax rate of many corporations is much lower than the nominal tax rate.  They neglect to mention that this only applies to large multinational companies.  These large multinational are able to escape the high corporate tax rate, because they have subsidiaries around the world and can shift income and production to low tax countries.  Raising their tax rate, just means they will move more and more of their production and income outside the US.  Large multinational companies are net job destroyers according to the Kauffman Foundation, so they should not be our focus.  Net new jobs and economic growth come from startups.  US startups do pay close to the nominal corporate tax rate and these draconian tax rates along with failure to provide an effective patent system, and regulations are killing our economy.

For a great article on this point see America has the Highest Taxes in the World.

 

The excellent book Great Again by Henry R. Nothhaft with David Kline, points out that 2000 was the year in which the tax and regulatory burden in theUS reached a tipping point compared to other OECD (First World) countries.  2000 was also the year in which average corporate tax rates of OECD countries fell below theUS’s.  TheUS now has highest marginal corporate tax rate in the world (in most states) and our effective tax rate is 50% higher than the European Union average.  Is there any wonder why the US is losing high quality jobs to other countries?

The book’s identification of the year 2000 as the tipping point is ironic since this is also the year that I identified in my book as the tipping point for anti-technology startup regulations.  The book Great Again calls the decade from 2000-2010 the lost decade, let’s hope it is only a single lost decade.  Besides the negative effects of the US corporate and capital gains tax rates, the US has also significantly weakened our patent system and made it extremely difficult for startups to raise capital because of Sarbanes Oxley (although Dodd Frank only makes this worse).  The major asset of startups is their patents – legal title to their inventions.  Weakening our patent system has undermined this asset.

Some other interesting points made by the book include that a SBA (Small Business Administration) study showed that 1% cut in the corporate tax rate increases the number of start-ups by 1.5% and decreases the rate of failure by 8%.  A World Bank study showed that 10% increase in the effective tax rate results in 2.2% reduction in investment to GDP.

The policies necessary to grow high quality jobs and get our economy growing are clear.  The only conclusion is that the US is not interested in growing the economy, it is only interested in growing government power.

Great Again: Revitalizing America’s Entrepreneurial Leadership, by Henry R. Nothhaft with David Kline

 

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