Nov 22, 2017

A Sign that Tax Reform is Headed in the Right Direction: The Competition is Nervous

Post by Freedom Partners

As Congress moves forward with tax reform, both the Senate and the House bills include a key provision lowering the United States’ corporate tax rate from 35-percent to a more competitive 20-percent. This is good news, as our nation’s corporate tax rate is currently the highest in the industrialized world, pushing American businesses to move overseas to low-tax countries.

The global average corporate tax rate is approximately 22.5-percent and getting below that average will make America significantly more competitive for jobs and investment. Last week, The Wall Street Journal highlighted rising Irish concern over the promise of a lower business tax rate. For years, Ireland, with it’s 12.5-percent tax rate on business income, has been attracting American companies to move their headquarters out of the U.S.

From The Wall Street Journal:

“We’re going to give the American people a huge tax cut for Christmas. Hopefully that will be a great, big, beautiful Christmas present,” said Mr. Trump. “Corporate rate will be reduced from 35 percent all the way down to 20 percent, which will make us competitive again, and companies won’t be leaving our country.” He added that “our tax plan will return trillions of dollars in wealth to our shores so that companies can invest in America again.”

Overseas, there seems to be some concern that Mr. Trump and tax reformers in Congress are about to do exactly that. The long-running Cantillon column in the Irish Times noted over the weekend that Thursday’s U.S. House vote to cut taxes “is highly significant” and that most Republicans in America “are united behind reforming the corporate-tax system.”

The column in the Dublin-based Irish Times added:

This is unsettling for Ireland. Addressing the House this week, Paul Ryan – a proud Irish-American – cited the example of Johnson Controls, a company that has had roots in his home state of Wisconsin since the 1880s but is now based in Ireland. The new tax system will help make the United States “the most competitive place in the world”, he said. Worrying words for Ireland.

Our foreign competitors are starting to get nervous, and that’s a good thing. With a more competitive tax code that encourages American businesses to stay here in the U.S., it will mean businesses will invest their money at home, grow our economy, and create jobs. It’s good news for all Americans seeking more opportunities, higher wages, and greater financial security.

Now is the time for Congress to unify around this positive vision for tax reform and give Americans the fairer, simpler, and more competitive tax code that they deserve.