Reforming How Businesses Are Taxed

Reforming How Businesses Are Taxed
Tax reform is​ a​ lot like the​ weather-everyone talks about it​ but no one seems to​ do anything about it .​
Incoming Treasury Secretary Henry Paulson could change that by focusing on​ the​ need for corporate tax reform .​
Congress should not ignore the​ tax rules governing individuals,​ but modernizing America's business tax system is​ critical to​ promoting growth,​ creating jobs and narrowing the​ budget deficit .​
In deciding how best to​ proceed,​ Secretary Paulson and Congress must recognize four things .​
First,​ America's Tax System Must Be Competitive .​
Every day we make choices based on​ cost: If gasoline is​ selling for 10 cents less on​ the​ left-hand side of​ the​ street than on​ the​ right,​ few of​ us turn right to​ fill up the​ car .​
Similarly with taxes: They are a​ cost that a​ business rightly considers as​ it​ locates new plants,​ creates distribution networks and hires workers .​
Taxes are not the​ only or​ most important cost to​ be considered,​ but they do matter .​
The U.S .​
system must change to​ remain competitive .​
Second,​ Tax Rates Matter .​
a​ critical aspect of​ tax competition is​ the​ tax rate .​
Regrettably,​ while individual rates have been reduced,​ the​ corporate rate has remained unchanged since the​ 1990s .​
In contrast,​ lowering tax rates has become the​ rule of​ the​ day in​ Europe .​
Significantly,​ lower rates do not mean lower revenues .​
Economist Martin Sullivan of​ the​ independent publication Tax Notes has confirmed that tax rate reductions in​ European countries have led to​ increased tax revenues .​
Moreover,​ a​ recent study of​ more than 70 countries by the​ American Enterprise Institute strongly links lower corporate rates with higher wages .​
Corporate tax reductions should do the​ same here .​
Third,​ the​ Tax Base Matters,​ Too .​
The amount of​ revenues raised by a​ tax system is​ the​ product of​ the​ tax rate and the​ tax base .​
While some incentives-such as​ those for research and education-have wide support,​ a​ growing consensus favors lower rates and a​ broader tax base to​ reduce complexity,​ ease tax administration and minimize the​ government's role in​ picking winners and losers .​
Fourth,​ Complexity Matters .​
a​ primary advantage of​ lowering taxes through a​ rate reduction is​ that such a​ system is​ much easier to​ construct and,​ hence,​ simpler for taxpayers to​ follow .​
Simple is​ good,​ because complexity represents a​ daunting,​ hidden tax on​ American business .​
The Tax Foundation estimated that in​ 2018 it​ cost taxpayers $265 billion to​ comply with federal income tax laws,​ with business's share being a​ staggering 55 percent .​
It is​ time to​ embrace corporate tax reform in​ order to​ promote growth,​ create jobs and reduce the​ trade and budget deficits .​
Michael P .​
Boyle is​ President of​ Tax Executives Institute,​ an​ organization of​ more than 6,​000 corporate tax professionals.
Reforming How Businesses Are Taxed Reforming How Businesses Are Taxed Reviewed by Henda Yesti on June 26, 2018 Rating: 5

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