Fewer Countries Double Tax Corporate Income
March 2, 2008
Rep. Scott Garrett (R-NJ), has a Washington Times op-ed explaining the need to cut the U.S. corporate income tax to stay internationally competitive:
Currently, the American corporate capital-gains tax rate is 35 percent, which happens to be the highest rate in its history, with the exception of 1940-41 owing to World War II. Some of our global competitors like Belgium, Hong Kong, Malaysia, New Zealand and Singapore don’t tax corporate capital gains.
Other competitors offer far better capital-gains taxation than the United States. For instance, Japan and the United Kingdom have exemptions when capital gains are reinvested. Even France and Germany passed a 95 percent exclusion. And, only the United States, Sweden and the Netherlands still tax corporate income at the corporate level and then again at the individual level when shareholders receive dividends.
The whopping 35 percent U.S. rate creates a “lock-in” effect of investment capital. This means that corporate taxpayers are less likely to sell appreciated assets because the high-burden tax makes it far from beneficial. The potential economic value of the assets is never reached, forcing corporate management to borrow on its appreciated assets, creating a higher debt burden for the company and less flexibility overall. The company’s employees bear the burden of this unfortunate alternative and the economy as a whole suffers.
Some estimates put the total amount of locked-in assets at more than $3 trillion.[…]