Thursday, July 19, 2007

"Our Broken Corporate Tax Code"

Here's an excerpt from Treasury Man Hank Paulson's excellent op-ed in today's Wall Street Journal. He's dead right. With countries all over the globe racing to reduce their tax rates, it is foolhardy for the United States to be in the back of the pack.

"In 1986, President Ronald Reagan in tandem with the Democratic House and Republican Senate reformed and simplified the tax code, reducing the number of brackets, closing loopholes and lowering individual and corporate rates. The U.S. moved from a country with above-average corporate tax rates to one with below-average rates. The Reagan tax reforms set the stage for 20 years of remarkable economic performance in the U.S. and around the world, what Ronald Reagan called "The American Miracle."

Twenty years later, after much of the world has followed our lead, the U.S. is once again a high corporate tax country. We now have, on average, the second-highest statutory corporate tax rate (including state corporate taxes), 39%, compared with an average rate of 31% for our top competitors -- the democratic, market-oriented nations that form the Organisation of Economic Cooperation and Development (OECD).

...The 1986 tax reform recognized that if there is a prescriptive role for business tax policy, it is to free companies to put capital to its best use, which is essential to grow and sustain higher standards of living for U.S. workers. Instead of building on the proven success of these reforms, we have moved in the opposite direction, making the code more complex, adding narrow provisions that create or respond to current headlines. What Reagan referred to in 1985 as the "old jalopy of our tax system" is clogging the U.S. economic highway yet again...."