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Corporate taxes: 2 percentage points mean the world

This week, we’re hearing the proposed 20-percent corporate tax rate is in jeopardy. There are rumors that the rate could increase to 22 percent, or even as high as 25 percent.

Despite being a substantial decrease from the current 35 percent rate, a 22 percent tax rate would have a measurable impact on economic growth and the attractiveness of the United States to international business.

Nine other countries in the Organization for Economic Co-operation and Development (OECD) have announced future corporate tax rate reductions. By 2020, if America’s corporate rate lands at 22 percent, plus state and local corporate tax rates averaging six percent, America would have a higher corporate tax rate than nearly three quarters of the OECD.

At 22 percent we wouldn’t even break into the middle of the pack, globally-speaking.

“Getting [the corporate rate] down to 20 is what we really need to help make U.S. companies competitive, to keep production and employment here in the United States rather than going overseas,” said Joshua Bolten, president of Business Roundtable.

The Tax Foundation estimates that for every dollar of revenue forgone due to the corporate rate cuts in the House and Senate packages, between 51 and 55 cents would be recaptured from the resulting economic growth.

“Failing to hold the line on 20 percent would be a huge mistake,” said James C. Miller III, who served as budget director (1985-88) for President Reagan. “In today’s very competitive world market, a couple of percent could mean less robust U.S. expansion, as well as companies leaving a good deal of cash abroad.”

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