Everyone in Washington agrees on something. Thatâ€™s news all by itself. What makes it even better news is that if Republicans and Democrats work together on this issue, the whole nation would benefit.
The issue is corporate tax reform. The Washington Post recently weighed in and called for the tax code to be simplified and the corporate tax rate lowered.
â€śThere is more common ground on corporate tax reform than many people realize,â€ť the Post opined. â€śPartisan politics and anti-reform special-interest lobbying have kept the status quo in place.â€ť
But that could be changing, because of a proposed corporate buyout that could be worth billions. If the American firm Pfizer succeeds in buying British-based AstraZeneca, it would be able to classify itself as a British firm â€” and pay the U.K.â€™s 20 percent corporate tax rate, rather than Americaâ€™s 35 percent tax rate.
The U.S. now has the highest corporate tax rate in the developed world, which puts it at a severe disadvantage. Is it any wonder companies keep their profits offshore, when the tax penalties for bringing them home are so significant?
Amazingly, both parties see the need for reform.
â€śPresident Obamaâ€™s proposed solution, offered during the 2012 campaign, was to reduce the corporate tax rate from 35 percent to 28 percent while imposing a minimum tax on foreign profits to discourage cash-parking abroad,â€ť the Post reported. â€śOn the Republican side, Rep. Dave Camp, the retiring chairman of the House Ways and Means Committee, offered a plan this year that would have cut the corporate tax rate to 25 percent, the developed-nation average, and subject foreign profits to a one-shot tax and exempt them from U.S. taxes thereafter, in line with the practice of most other industrial countries.â€ť
In a recent Heritage Foundation paper, economist Curtis Dubay warned that companies feel forced to leave the U.S. because of the pressures of the high tax rate.
Pfizer is one example; another is the Walgreenâ€™s corporation, which has purchased a Swiss company and could soon relocate its headquarters to Europe.
Tax reform could be revenue-neutral, even if the rate is lowered. Thatâ€™s because a lower rate would boost economic activity. Thatâ€™s not speculation. Thatâ€™s history.
â€śHigh tax rates do not always lead to high tax revenues,â€ť a 2007 World Bank report explained. â€śBetween 1982 and 1999, the average corporate income tax rate worldwide fell from 46 percent to 33 percent, while corporate income tax collection rose 2.1 percent to 2.4 percent of national income... Russiaâ€™s ... corporate tax rates fell from 35 percent to 24 percent, and a simplified tax scheme lowered rates for small business. Yet tax revenue increased â€” by an annual average of 14 percent over the next three years ... Albaniaâ€™s corporate tax revenue rose 21 percent after the rate was cut, while in Moldova it jumped 28 percent and in Latvia, 37 percent.â€ť
Thereâ€™s no argument here.
â€śPerhaps Pfizerâ€™s proposed deal will be the wake-up call Washington needs to push for bipartisan tax reform, if not before the November election, then after it,â€ť the Post said.