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And, the CP would immediately improve growth and competitiveness.
The Tax Foundation, a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937, “Study on
International Business Competitiveness Underscores Need for U.S. Corporate Tax Reform,” 4/14/ 2010, http://www.taxfoundation.org/news/show/26189.html
The release of a KPMG study on international business location ranking the United States near the bottom of the pack highlights the
need to lower the federal corporate tax rate, according to a Tax Foundation report.
KPMG's "2010 Competitive Alternatives" study, the firm's guide to international business location, ranks the U.S. eighth out of 10 countries, ahead of only Germany
and Japan. U.S. border nations Mexico and Canada rank first and second, respectively, with the lowest overall costs of doing business.
"U.S. lawmakers who are worried about the economy's slow recovery and weak job growth should take special note of America's low
ranking among countries that are cost-effective places to do business," said Tax Foundation President Scott Hodge, who authored Tax Foundation
Fiscal Fact, No. 221, "New KPMG International Location Study: U.S. Is Falling Behind; Taxes Are a Major Fault." The Fiscal Fact is available online at
http://www.taxfoundation.org/publications/show/26187.html.
"Cutting the federal corporate tax rate would immediately improve U.S. competitiveness while setting the stage for long-term
economic growth," Hodge said.
The KPMG study compares the business-cost competitiveness of 112 cities in 10 countries, including 15 in Canada and 60 in the U.S. Considering every factor, the
most cost-effective city was Monterrey, Mexico, while Montreal was the top-rated Canadian city and Tampa the top-ranked American city.
On the tax side, KPMG considers corporate income taxes, capital taxes, sales taxes, property taxes and local business taxes. KPMG compares both statutory corporate
tax rates as well as effective corporate tax rates after accounting for various credits and deductions that each country in its corporate tax code.
On top of the 34% average federal rate faced by U.S. firms, state and local corporate income taxes are factored in as well. Of the sample U.S. cities selected by KPMG,
effective corporate income tax rates ranged from 26.49% in Seattle to 37.8% in Honolulu. By contrast, St. John's, Canada, has an effective corporate come tax rate of
9.62%.
"Many of the cost components measured by KPMG are beyond the control of lawmakers or can't be quickly improved with policy solutions," Hodge said. "Tax
policy, however, is one factor that federal and state lawmakers can change immediately, resulting in dramatic short- and long-term
benefits. Lowering corporate tax rates would go a long way in improving U.S. competitiveness abroad ."
Economy Solvency Wall
1.
CP provides a massive short-term economic stimulus and increases growth efficiency in the long-term.
Jeffrey A. Miron, senior lecturer in economics at Harvard University, “Economic Change We Can Believe In,” 2/6/2009,
http://reason.com/archives/2009/02/06/economic-change-we-can-believe
One policy change, however, can stimulate both the economy in the short-run and enhance efficiency in the long-run: repeal of the
corporate income tax, which collects up to 35% of the difference between revenues and costs of incorporated businesses.
From the efficiency perspective, the corporate income tax has never been sensible policy. Economic theory holds that an efficient tax system should not
tax capital income, since this distorts the incentives to save and invest. Even if the tax base includes capital income, corporate income taxation is overkill. All income
earned by corporations accrues to households as dividends or capital gains, and this income is then taxed by the personal income tax system.
Proponents argue that the corporate income tax makes sense because high-income taxpayers own corporations at a disproportionate
rate. This desire to redistribute income can still be achieved using the personal tax system. That approach is better targeted than taxing corporate income, since many
low and moderate income households own corporations via their pensions and 401(k)s. The true burden of corporation taxation falls not just on
stockholders, but on employees through lower wages and on consumers through higher prices. Thus corporate taxation hits taxpayers
across the income spectrum.
Corporate income taxation has other negatives. It requires a complicated set of rules and regulations, over and above the personal income tax
system, generating compliance costs. Special interests ensure that corporate tax systems favor specific industries or activities, further distorting private
investment decisions. Along those lines, corporation taxation reduces financial transparency, making it harder for investors to monitor
corporate behavior.
So repeal of the corporate income tax is good policy independent of the state of the economy and would provide short-run stimulus.
2.
CP creates financial market growth and would increase the GDP by $1 trillion.
Jeffrey A. Miron, senior lecturer in economics at Harvard University, “Economic Change We Can Believe In,” 2/6/ 2009,
http://reason.com/archives/2009/02/06/economic-change-we-can-believe
Repeal means higher stock prices and improved cash flow. Corporations would respond to this change by investing in plant and
equipment, and by hiring additional workers. These investments would be more productive than the ones funded by stimulus projects, since corporations
respond to market forces, not to political influence. Since corporations could more easily invest out of retained earnings, repeal would also
circumvent many banks' reluctance to lend.
The budgetary impact of a corporate income tax repeal—roughly $300-350 billion per year—might seem daunting, but this amount falls well short of the Obama fiscal
package. The long-run impact will be less than what is implied by current revenues, since repeal will expand economic activity and therefore increase
other kinds of tax revenue.
The stimulus impact of a corporate income tax repeal is likely to be substantial . Recent estimates by Christina Romer, the head of Obama's Council
of Economic Advisers, suggest that tax cuts have a multiplier of three, meaning that repeal would increase GDP by roughly $1 trillion.
By comparison, the administration's assumption that the government spending multiplier is about 1.5 suggests that the $500 billion in the Obama stimulus package
would increase GDP by about $750 billion.
Elimination of the corporate income tax is a no-brainer. It benefits the economy in both the short-run and the long-run, with modest
implications on the government budget.
The broader lesson here is that policymakers should attempt to improve the economy by eliminating currently existing bad policies, not just by adding new layers of
government. By focusing equally on efficiency and stimulus, policymakers can set the stage for a sustained and healthy recovery .
3.
Investment generated by the CP is key to long-term growth.
Douglas Holtz-Eakin, president of DHE Consulting, LLC, and visiting fellow at the Heritage Foundation, and Gordon Gray, senior adviser at DHE Consulting,
“Global Competitiveness and the Corporation Income Tax,” 4/30/ 2009, http://www.heritage.org/Research/Reports/2009/04/Global-Competitiveness-and-theCorporation-Income-Tax
Corporate taxes have long been deemed to have a negative effect on investment and capital formation .[17] However, several recent studies
indicate the extent to which corporate taxes harm capital formation and economic growth.[18] One study in 2008 examined tax data across 85 countries and determined
that raising the effective corporate tax rate by 10 percentage points reduces the investment rate by 2.2 percentage points. Investment and capital formation is
essential to enduring economic growth. Tax policies that inhibit such activity necessarily impede growth, which the study also finds .
The OECD also has recently released several studies that effectively sort tax structures according to their respective economic effects. According to the OECD,
"corporate income taxes have the most negative effect on GDP per capita,"[19] which is consistent with previous findings that the
corporate tax reduces investment and, therefore, economic growth. The OECD found that reducing the statutory corporate tax rate
from 35 percent to 30 percent increases the ratio of investment to capital by approximately 1.9 percent over the long term.
Competitiveness Solvency Wall
1.
CP encourages domestic investment and innovation while reducing incentives for offshoring.
Michael S. Knoll, UPenn School of Law, “The Corporate Income Tax and the Competitiveness of U.S. Industries,” 2009,
http://lsr.nellco.org/cgi/viewcontent.cgi?article=1262&context=upenn_wps
In order to understand how the corporate income tax discourages investment in U.S. automobile production, consider
an investment that will occur in either
the United States or Asia. The investment might be in the production of a new fuel efficient automobile to be sold in Europe. If the
cars are produced in the United States, whether by U.S.- or foreign-based corporations, U.S. corporate tax is imposed on the income that
arises in the United States. If, however, those cars are produced in Asia by non-U.S. corporations, no U.S. corporate taxes are imposed on
that income. The only taxes collected on the income from the production of those vehicles will be the taxes imposed by the country of origin. Thus, if the U.S.
corporate tax rate exceeds the corporate tax rate in the alternative Asian jurisdiction, then the U.S. corporate income tax will reduce
the return from investing in the United States relative to the return from making the same investment in Asia . That, in turn, will increase
the hurdle rate for such investments in the United States relative to the rate for investments in Asia. Therefore, if the corporate income
tax rate in the United States is higher than the rate in Asia, then the U.S. corporate income tax will discourage investments in
the United States in favor of investment in Asia.
Although the investment dampening effect of the corporate income tax is easiest to see when the output is sold in a third jurisdiction, the same logic applies when the
output is sold in the United States or in the country of origin. In such cases, long-standing income tax principles call for the division of total income into the income
from production and the income from sale.38 Because the income from sale arises in the importing jurisdiction, it is only the income from production that arises where
production occurs. Thus, the U.S. corporate income tax by raising the hurdle rate for investment in the United States drives capital
investment toward other jurisdictions. Hence, the second way that the U.S. corporate income tax harms the competitiveness of U.S.
industries is by discouraging investment in productive activities in the United States in favor of investment elsewhere .
2.
CP solves misallocation of entrepreneurial talent.
Douglas Holtz-Eakin, president of DHE Consulting, LLC, and visiting fellow at the Heritage Foundation, and Gordon Gray, senior adviser at DHE Consulting,
“Global Competitiveness and the Corporation Income Tax,” 4/30/ 2009, http://www.heritage.org/Research/Reports/2009/04/Global-Competitiveness-and-theCorporation-Income-Tax
A large body of research pioneered in the 1960s analyzed the corporation income tax as a "partial factor tax"--an additional tax on the return to capital invested in
the corporate sector--in the context of an economy closed to international flows of goods and capital.[1] Even when viewed from this narrow perspective, the tax has
many flaws.
First, it introduces significant distortions in the behavior of firms, including reducing the incentive to organize business activity as a
Schedule C corporation in favor of other forms of organization. (Schedule C corporations benefit from limiting financial liability to the corporation's
assets--not those of the owners.) The large increase in limited liability partnerships, sub-chapter S corporations, and limited liability corporations and other entities that
protect personal assets without incurring an additional layer of taxation reflects this distortion. The effect on firm organizational form has been found to
impose a cost by misallocating entrepreneurial talent in the economy--a cost that had otherwise been left out of prior literature .
3.
The economic benefits of the CP are key to US preeminence.
Douglas Holtz-Eakin, president of DHE Consulting, LLC, and visiting fellow at the Heritage Foundation, and Gordon Gray, senior adviser at DHE Consulting,
“Global Competitiveness and the Corporation Income Tax,” 4/30/ 2009, http://www.heritage.org/Research/Reports/2009/04/Global-Competitiveness-and-theCorporation-Income-Tax
The U.S. faces considerable fiscal and economic challenges. Recent and likely federal expenditures underscore the imperative for the federal government
to have a robust and efficient revenue collection system. The U.S. has mounting fiscal obligations and requires the means to finance them.
However, these imperatives should not preclude improving this mechanism. Indeed, there are better and worse ways to tax.
Less than one-fifth of federal revenue is collected by the corporate tax, yet its very existence has been found to lower wages, diminish investment,
and slow economic growth--more so than any other tax structure. While other nations have been gradually reducing their tax rates,
the U.S. has failed to act, leaving the U.S. corporate tax rate as the second highest among major industrial nations. While other nations are
competing for scarce capital by lowering rates, the U.S. entertains potentially anti-growth corporate reforms. The considered theoretical and empirical
research literature leaves little doubt that in an open global economy, capital will flow to low-tax jurisdictions, ultimately driving
economic growth.
It is imperative that the U.S. not cede this opportunity or its preeminence in the world economy to intransigence by failing to enact
sensible reforms to its corporate tax code.
And, we solve the aff’s internal links –
1.
It increases wages.
Robert Carroll, senior fellow at the Tax Foundation, a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since
1937, “The Corporate Income Tax and Workers’ Wages: New Evidence from the 50 States,” August 2009, http://www.taxfoundation.org/files/sr169.pdf
Lately, observers have challenged the conventional wisdom by researching the recent wave of corporate rate cuts among developed nations. Studies have shown that in
general, countries that cut their corporate tax rates enjoyed the largest gains in workers’ wages .
The intuition behind this new research is straightforward: economic theory suggests that the least mobile factor of production is likely to bear the
burden of a tax. In an increasingly global economy, labor is the least mobile because capital can flow freely across borders . Therefore, it is
reasonable to expect most of the corporate tax burden to be borne by labor, not capital. It follows, therefore, that countries with low
corporate tax rates will attract investment and generate capital formation. When workers have more capital to work with, their labor
productivity and wages will rise.
2. That solves worker shortage – the plan short-circuits the labor market and makes the US dependent on foreign labor.
Seattle Post Intelligencer, “A tech labor shortage myth? Exploring the H-1B visa debate,” 4/3/2009, http://blog.seattlepi.com/microsoft/archives/165656.asp
Boeing's engineering union, SPEEA, is in a unique position to comment on the issue: It is one of few unions in the country that represents hightech workers. (SPEEA stands for Society of Professional Engineering Employees in Aerospace.)
SPEEA Legislative Director Stan Sorscher has been monitoring the H1-B visa debate since 2000. He says that in a true labor shortage, wages should rise in
keeping with the simple rules of supply and demand .
"If we had a shortage of soybeans, the price would go up. If we had a surplus of oil, the price would go down ," Sorscher said. "And
eventually we'd buy less soybeans and consume more oil."
He points out that in 1999, a labor shortage driven by the high-tech boom led to a bidding war for workers, affording such employees free
concierge service, ping pong tables, permission to bring one's dog to work and so on.
High wages would drive more students into those skilled fields.
"If instead you bring in 150,000 foreign workers and you're only graduating 120,000 new students annually, you've shortcircuited the labor market," Sorscher said. "Our policy to bring in the foreign workers has the effect of short-circuiting the labor market
and preventing us from ever producing enough domestic workers ."
Once domestic workers are discouraged from entering the field, the U.S. becomes dependent upon foreign workers, he says.