Today’s lead editorial in the Wall Street Journal, “We’re Number One, Alas.” (Paid subscription required):
Some good news on the tax cutting front: Last week lawmakers approved an 8.9 percentage point reduction in the corporate income tax rate. Too bad the tax cutters are Germans, not Americans.
There’s a trend here. At least 25 developed nations have adopted Reaganite corporate income tax rate cuts since 2001. The U.S. is conspicuously not one of them. Vietnam has recently announced it is cutting its corporate rate to 25% from 28%. Singapore has approved a corporate tax cut to 18% from 20% to compete with low-tax Hong Kong’s rate of 17.5%, and Northern Ireland is making a bid to slash its corporate tax rate to 12.5% to keep pace with the same low rate in the prosperous Republic of Ireland. Even in France, of all places, new President Nicolas Sarkozy has proposed reducing the corporate tax rate to 25% from 34.4%.
The Journal concludes that one sensible policy remedy for the United States would be to cut the 35 percent U.S. federal corporate tax rate to the industrial nation average of 29 percent. That suggestion runs closely along the lines of the NAM’s recommendations on tax policy made in our NAM white paper, “A 21st Century Tax Policy to Promote Job Creation and Economic Growth.” (You can download the white paper here as a .pdf file.)
The paper includes an extensive discussion of the salutory economic effects of reducing corporate tax rates, recommending a reduction to 25 percent.
There is strong evidence that reducing the corporate tax rate would lead to greater economic growth, higher wages for workers, an increase in productivity levels, more business investment and lower inflation.
Other countries — our competitors — have concluded the same thing and are acting accordingly. Will the United States?
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