On Monday the Tax Foundation, which manages the widely followed State Business Tax Climate Index, will launch a new global benchmark, the International Tax Competitiveness Index. According to the foundation, the new index measures “the extent to which a country’s tax system adheres to two important principles of tax policy: competitiveness and neutrality.”
A competitive tax code is one that limits the taxation of businesses and investment. Since capital is mobile and businesses can choose where to invest, tax rates that are too high “drive investment elsewhere, leading to slower economic growth,” as the Tax Foundation puts it.
The index takes into account more than 40 tax policy variables. And the inaugural ranking puts the U.S. at 32nd out of 34 industrialized countries in the Organization for Economic Co-operation and Development (OECD).
One small correction: the authors of the study list Slovenia and Slovakia separately when everyone knows they’re the same thing. And is there really a Switzerland and a Sweden? Someone should clean that up.
Aside from that, however:
Any day now the White House and Sen. Charles Schumer (D., N.Y.) will attempt to raise taxes on business, while making the U.S. tax code even more complex. The Obama and Schumer plans to punish businesses for moving their legal domicile overseas will arrive even as a new international ranking shows that the U.S. tax burden on business is close to the worst in the industrialized world. Way to go, Washington.
With the developed world’s highest corporate tax rate at over 39% including state levies, plus a rare demand that money earned overseas should be taxed as if it were earned domestically, the U.S. is almost in a class by itself. It ranks just behind Spain and Italy, of all economic humiliations. America did beat Portugal and France, which is currently run by an avowed socialist.
The new ranking is especially timely coming amid the campaign led by Messrs. Obama and Schumer to punish companies that move their legal domicile overseas to be able to reinvest future profits in the U.S. without paying the punitive American tax rate. If they succeed, the U.S. could fall to dead last on next year’s ranking. Now there’s a second-term legacy project for the President.
And people wonder why Recovery Summer V has been no more successful than Recover Summers I-IV. (People wonder, but the media seem not to.)
But get a load of this remedy. Are you sitting down?
Rather than erecting an iron tax curtain that keeps U.S. companies from escaping, the White House and Congress should enact reform that invites more businesses to stay or move to the U.S.
OMG! You are one bad-ass newspaper, WSJ. Next you’ll be arguing for a cut in the capital gains tax rate:
A rising tide lifts all boats, but Obama warned us that the tide would stop rising if he were elected president. One promise he kept.