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- Cut The Corporate Tax Rate From 35 To 25 Percent.
- A lower corporate tax rate is essential to U.S. competitiveness. America was once a low-tax business environment, but as our trade partners lowered their rates, America failed to keep pace, leaving us with the second-highest rate among the world’s advanced economies.[1]
- Cutting the corporate tax will expand the U.S. economy, creating jobs and opportunities for prosperity. A recent analysis of tax policy options estimated that a cut less than half this size could increase long-term growth by 0.5 percent, or $100 billion in a single year.[2]
- Lower corporate taxes leads to higher wages. Recent studies have shown that corporate taxes are in large part passed on to labor through lower wages. One study noted that a one percent hike in the corporate tax results in a 0.8 percent decrease in manufacturing wages.[3] Accordingly, cutting corporate taxes can increase wages for American workers.
- Allow First-Year Deduction, Or “Expensing”, Of Equipment And Technology Investments.
- Expensing of equipment and technology will provide an immediate boost to capital expenditures and reward investments in cutting-edge technologies.
- The additional investment stimulated by a change to expensing of equipment and technology will drive economic growth. A recent estimate of a modest expensing provision predicted a gain of 1.5 percent in long term economic growth.[4]
- The complexity of our tax code needlessly burdens American businesses and families with $140 billion in compliance costs.[5] Allowing expensing will eliminate the need for complicated accounting for depreciation.
- Establish Permanent Tax Credit Equal To 10 Percent Of Wages Spent On R&D.
- The R&D tax credit will simplify the tax code, reward activity in the United States, and make us more competitive with other countries.
- A permanent credit will provide an incentive to innovate and remove uncertainty. At a time when our companies need to be more competitive, we need to provide a permanent incentive to innovate, and remove the uncertainty now hanging over businesses as they make R&D investment decisions.
- These Are Essential First Steps On The Path To Fundamental Tax Reform, Which Could Increase U.S. GDP By As Much As 10 Percent Over The Long Term.[6]
[1] Robert Carroll, “Fiscal Stimulus: Missing The Big Picture?” The Tax Foundation, January 11, 2008
[2] U.S. Department of the Treasury, “Approaches to Reform the U.S. Business Tax System for the 21st Century,” December 20, 2007
[3] Kevin Hassett and Aparna Mathur, “Taxes and Wages,” American Enterprise Institute for Public Policy Research, Working Paper Number 128, June 2006.; The President’s Advisory Panel on Federal Tax Reform (2005)
[4] U.S. Department of the Treasury, “Approaches to Reform the U.S. Business Tax System for the 21st Century,” December 20, 2007
[5] The President’s Advisory Panel on Federal Tax Reform (2005)
[6] Alan J. Auerbach, Kevin A. Hassett, et al., “Toward Fundamental Tax Reform,” AEI Press, May 2005
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