Tax burden hobbles America in global market
Created on February 24, 2009
American business carries tax burden
into global market
The White House and Congress are talking about loading more
taxes on the backs of American entrepreneurs and investors, who
already struggle to keep up with global competitors from India to
China and Mexico to Russia.
The typical taxpayer probably would be surprised to learn the
United States already has the second-highest corporate taxes
among industrialized nations. "We're falling
behind by standing still," says Alison Acosta Fraser, director of
the Roe Institute for Economic Policy Studies at The Heritage
President Barack Obama and congressional leaders propose to let
the 2003 tax cuts expire in 2010 and raise taxes on those making
more than $250,000 a year -- many of whom own small businesses that
are in the global mix.
"President Obama may propose tax hikes not take effect until
2011, but the fact is they already are depressing economic activity
in the middle of the recession," Fraser
says. "Facing higher future taxes, businesses, investors and savers
reduce their activities today."
In 1986, in contrast, other nations followed the U.S. example by
cutting tax rates on businesses so they could take risks and create
jobs. But America's top corporate tax rate, 35 percent (or 40
percent, counting state taxes), is now the highest among all but
one of our 30 largest trading partners -- a sluggish Japan.
We're not talking small potatoes, either. U.S. trade with the 30
countries in 2007 was valued at $2.7 trillion. That's 90 percent of
our exports and imports.
Some of the top corporate tax rates among those
competitors: India, 34 percent; France, 33 percent; Italy, 31
percent; Saudi Arabia, 30 percent; Germany, 29.5 percent; Mexico,
28 percent; China, 25 percent; Russia, 24 percent.
Our new president and Congress make a grave mistake by failing
to reboot economic growth with proven incentives for encouraging
Americans to work, save, innovate and invest, Fraser and other
Heritage analysts believe.
Reducing the top tax rate on employers and individuals by 10
percentage points -- along with tax relief for middle-class
Americans -- would create 1.3
million jobs by next year and over 5 million more by 2014, a study
by Heritage's Center for Data Analysis shows.
Struggling employers, many hoping to hire and grow to compete
against overseas companies with much smaller tax burdens, would
embrace that as real change.