Is the U.S. Tax Code Holding Back Our Economic Growth?
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Yesterday, the Wall Street Journal reported that more U.S. companies are moving their operations overseas in order to avoid the high corporate tax rates they face domestically. The U.S. has the highest marginal tax rate of developed nations, with the top federal rate for companies reaching 35 percent. Once state and local taxes on corporations are factored in, the combined rate is 39.2 percent.
Meanwhile, the average corporate tax rate for developed nations is only 25.4 percent. But, while government officials have proposed lowering the corporate tax rate to stimulate economic growth in the U.S., businesses are still uncertain about whether or not these reforms will go into effect anytime soon. And with Congress delaying on issues such as the fiscal cliff, the debt ceiling and defense cuts, who can blame them?
As they wait, American companies are forced to compete with developed nations offering a lower tax rate for companies producing the same products. Even with all of this extra revenue from a higher corporate tax rate, Washington has still managed to run a $974 billion deficit this year.
With the latest national unemployment numbers set to be released next Friday, Washington needs to look at the challenges we face and make the tough choices to put America back on the path towards strong economic growth—not put us further into debt.