By Barbara Hollingsworth, Apr. 15, 2014
(CNSNews.com) – Eliminating or greatly reducing America’s corporate income tax “produces rapid and dramatic increases” in “U.S. investment, output, and real wages,” creating jobs for American workers and boosting the nation’s Gross Domestic Product (GDP) a full 6 percent, according to a new study released Tuesday on Capitol Hill.
“The tax is mostly about driving companies out of the United States,” Dr. Laurence Kotlikoff, aneconomist at Boston University and one of the study’s four co-authors, told CNSNews.com.
“The burden of the corporate income tax falls mainly on workers,” he pointed out, “and they are the ones who will gain most from reform.
“When you turn off the corporate tax and raise personal taxes, surprisingly good things happen,” explained Kotlikoff, director of the new Tax Analysis Center,. “A lot of companies abroad would start operating in the U.S., and U.S. companies that are investing abroad would start investing here.”
At 35 percent, the U.S. currently has the highest marginal corporate tax rate among developed countries. On March 31st, Moody’s Investor Services reported that in 2013, non-financial U.S.-based businesses held $947 billion in cash overseas, up 12 percent from 2012.
“The high amount reflects the negative tax consequences of permanently repatriating money to the U.S. and the domestic use of cash for dividends, share buybacks and the majority of acquisitions,” said Moody’s vice president Richard Lane.
The study used a state-of-the-art, life-cycle computer model to track capital flow simulated by tax reform in the U.S. while assuming no changes in tax rates in Europe, Japan, China and India. It found that eliminating the corporate income tax would return a large amount of capital to the U.S., where it would be put to use creating jobs and expanding productivity.
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