The Babe Theory Of Political Movements.
Mar. 21, 2005 11:50 AM
Iran's Sham Election In Houston.
June 20, 2005 5:36 AM
Yes, Kanye, Bush Does Care.
Oct. 31, 2005 12:41 AM
Health Care vs. Wealth Care.
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Americans Voting With Their Feet.
Nov. 30, 2005 1:33 PM
Idea Majorities Matter.
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Twilight Zone Economics.
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The "Shrinking" Middle Class.
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From Ashes, GOP Opportunities.
Dec. 18, 2006 6:37 PM
Battle Between Entitlements & Pork.
Dec. 21, 2006 12:31 PM
Let Economic Freedom Reign.
Dec. 22, 2006 10:22 PM
Biggest Health Care Moment In Decades.
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Unions Antithetical to Liberty.
May 28, 2008 11:12 PM
Right To Work States Rock.
June 9, 2008 12:25 PM
Social Security Reform Thursday.
March 13, 2008
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The Carnival Of Classiness.
Mar. 14, 2006
Quotational Therapy: Obama.
Apr. 4, 2008
Mainstream Melee: Wolfowitz.
May 19, 2007
Pundit Roundtable: Leaks.
July 9, 2006
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Trivia Tidbit Of The Day: Part 222 -- U.S. Losing Its Low Tax Comparative Advantage.
The United States Needs To Lower Its Corporate Tax Rate-
You may have heard of it.
Essentially, countries (or states, or cities...) compete with one another in the increasingly interconnected global marketplace, and those with advantageous business conditions relative to other countries tend to rise to the top. If goods or services can be produced more efficiently (cheaper, faster, better) in Zanbogo than in New Shariza, companies will choose to locate in Zanbogo. Zanbogo, all other things being equal, would have a comparative advantage over New Shariza.
It's not rocket science.
Let's think, then, about America's comparative advantages over other countries. Traditionally, the U.S. has had lower taxes, a highly skilled/educated workforce, proximity to our own thriving consumer market, an abundance of natural resources, a strong rule of law, less governmental corruption, and a variety of other advantages over other countries. On the other hand, America is a rampantly litigious society, with relatively strict environmental and labor regulations. These factors drive up the cost of doing business in the U.S.A.
But, as recently as a few years ago, relatively low taxes have been a defining trait of the American economy. Oddly enough, although President Bush has been fiercely committed to tax relief during his administration, the U.S. has slipped a bit in its corporate tax rate comparative advantage.
Other countries are catching on to the fact that globalization means economies do not exist in separate, sterile lab beakers. Countries must compete with each other, policy-wise, in order to lure (and/or keep) dynamic, job-creating, wealth-generating companies.
From 2000 to 2005, corporate tax rates around the world fell significantly, while remaining nearly unchanged in the U.S. (.pdf):
After cutting 12 percentage points off its corporate tax rate in 1986, the U.S. rate stayed below the world average until 1994. That was the first effective year of the tax hike President Clinton signed into law a year after his election, the Omnibus Budget Reconciliation Act of 1993, which added a new top rate of 35 percent. Since then, the top federal statutory U.S. rate has remained at 35 percent. Combined with an average state corporate income tax rate of 6.6 percent, which is deductible from federal taxable income, the overall rate of tax on corporate income is 39.3 percent in the U.S. Among our major trading partners, tax competition has driven the average rate down to 29.2 percent....
To be sure, the U.S. has other advantages (even tax ones) over other countries, but do we really want to get left behind by the global corporate tax cuttimng phenomenon? Does the U.S. actually want to become a high tax haven?
Previous Trivia Tidbit: Smoking.
Posted by Will Franklin · 21 November 2005 05:38 PM