http://hbr.org/2012/07/a-better-way-to- ... esses/ar/1
Interesting article on reforming corporate taxes.
Of all the policy changes that could improve the competitive position of the United States and the living standards of Americans, revamping the corporate tax code is perhaps the most obvious and least painful. High corporate taxes divert capital away from the U.S. corporate sector and toward noncorporate uses and other countries. They therefore limit investments that would raise the productivity of American workers and would increase real wages. This is the cruel logic of a corporate tax in a global economy—that its burden falls most heavily on workers.
What principles should guide a reform of the corporate tax that would advance American interests? First, the structure of the tax must reflect developments in the world economy—notably, declining tax rates in other nations, the mobility of innovative and headquarters activities, and the rising importance of non-U.S. markets. Second, corporate tax reform will probably need to be instituted separately from fundamental tax reform and must be roughly revenue-neutral, given fiscal and political realities. Third, any reform must relegitimize corporations as responsible citizens and the corporate tax as a meaningful policy instrument.
So what say those that believe corporate tax rates need to be increased?The worst of all worlds—high rates and a narrow base. In 1986, the year of the last significant tax reform, the U.S. corporate tax rate was lower than that of most developed countries. Today the top U.S. corporate rate of 35% is one of the world’s highest. During the intervening years, America’s global economic importance decreased—a sometimes unsettling artifact of welcome growth in the developing world. As the importance of doing business in the United States has shrunk, the relative cost has risen rapidly.
Because capital is mobile, high tax rates divert investment away from the U.S. corporate sector and toward housing, noncorporate business sectors, and foreign countries. American workers need that capital to become more productive. When it’s invested elsewhere, real wages decline, and if product prices are set globally, there is no place for the corporate tax to land but straight on the back of the least-mobile factor in this setting: the American worker. The flow of capital out of the United States only accelerates as opportunities in the rest of the world increase. This is the key to understanding why, despite political rhetoric to the contrary, reforming the corporate tax is central to improving the position of the American worker.
