'The American Spectator' on Obama's Corporate Tax Hike

Obama’s Corporate Tax Hike

By Ross Kaminsky, The American Spectator, on 2.23.12 @ 6:10AM

The cynical madness continues.

On Wednesday, the president announced his plans to modify the U.S. tax code by cutting the corporate income tax rate from 35 percent to 28 percent. Our current rate is the second-highest in the OECD, and about to be the highest with Japan cutting its rate in April. Currently, our corporations’ average total income tax rate, including the typical state tax rate of just over 4 percent, gives us the highest corporate taxes in the industrialized world, above 39 percent.

If cutting the corporate income tax rate were all the president was trying to do, one might call it a good start, but only a start since the average total corporate tax rate of over 32 percent for American corporations will still be far above the OECD average of 25 percent.

As the American Enterprise Institute’s James Pethokoukis reminds us, the OECD says that of all major types of taxes, “corporate taxes are found to be most harmful for growth.”

High corporate tax rates lead to reductions in capital formation and foreign direct investment, particularly in more profitable companies and industries. High taxes are associated with “re-allocation of resources towards possibly less productive sectors.” And high taxes favor companies that use debt over companies that raise money through equity (stock) offerings — the latter group including most startups and technology companies where a majority of America’s employment growth is to be found.