AEI on Tort Reform, Corporate Taxation

By August 1, 2007Briefly Legal, Taxation

A couple of interesting, manufacturing-relevant papers coming out of the American Enterprise Institute in recent days. Ted Frank has a new analysis of the just-completed Supreme Court term and its rulings on tort reform (and ancillary issues), “The Roberts Court and Liability Reform.” Summary:

In its most recent term, the Supreme Court deferred decisions on the constitutionality of punitive damages and the power of the administrative branches to declare preemptive effect to regulation by making minimalist incremental decisions, but it also took some dramatic steps in other cases that will have a lasting effect. The Roberts Court regularly recognizes the limits of litigation and the dangers of judicial aggrandizement, while expressing an increasing willingness to get involved in the nitty-gritty of business litigation cases that the Rehnquist Court largely avoided. We should therefore be cautiously optimistic about future developments as important cases about federal preemption and the scope of securities laws come before the Court in October Term 2007.

And Alex Brill and Kevin A. Hassett have analyzed corporate tax rates in OECD countries, drawing relationship to the revenues they raise in a working paper entitled, “Revenue-Maximizing Corporate Income Taxes.”

Corporate tax rates have been in decline for over two decades. This is true globally, although cuts have been more significant among developed nations where initial rates tended to be higher. Significant increases in trade, foreign direct investment and globalization have occurred over the same period, and increased capital mobility may have led to increased rewards from tax competition. In addition, clever tax managers may be able to use direct investment and transfer pricing to locate profits in low tax countries with increasing competence. If so, the benefits of being a low tax country, and costs of being a high tax country, might be significantly higher today than they were in the early 1980s.

Which would be a conclusion consistent with the NAM’s white paper on taxation and global competition. It’s “A 21st Century Tax Policy to Promote Job Creation and Economic Growth.”

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