What’s a Few Trillion Among Friends?

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Taxes matter. High U.S. corporate income taxes have spawned a recent wave of tax inversion deals.

A tax reform package has final been revealed. The proposed changes offer simplicity, a reduction in individual tax rates, and most importantly, a change in corporate taxes. U.S. businesses face one of the highest corporate income tax rates in the world, 35%. Compare that with business-friendly Ireland at 12.5%. Small businesses often pay taxes at the owner’s individual rate - as high as 39.6%. Corporations are also subject to the very unfavorable business model which requires them to not only pay taxes in the country where income is earned, but then pay another 35% on cash brought back to the U.S. This is truly a business buzz kill. Opponents of the new plan are lamenting a $2.2 trillion potential increase in the deficit and are calling for a revenue neutral plan. Where were all of the deficit hawks when more than $4 trillion was added to the deficit over the last 8 years resulting in very tepid growth? In addition, the calculations don’t account for a surge in business investment, productivity and GDP. While economists can’t be sure how much growth will ensue when the U.S. becomes a true competitor in the global market, one thing everyone agrees on is that the U.S. corporate rate is too high. Please compare corporate tax rates by country on page 73 of the Global Perspectives™ Book and watch Karyn Cavanaugh’s latest comments on the market.

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