CIAO DATE: 07/2011
April 2011
Peterson Institute for International Economics
The US budget outlook has the makings of a fiscal disaster, but it is the beginning of economic challenges, not the end. Among other challenges, a tax system that discourages business and erodes American competitiveness ranks high. The United States lags well behind other advanced countries, not to mention China, in reforming its corporate tax regime. Instead, over past decades, the United States has sought to make up through a high statutory tax rate, especially on multinational corporations (MNCs), what has been lost though a host of exemptions, deductions, and credits. The combination of a high corporate tax rate and its worldwide reach makes the United States—despite all its positive attributes—one of the least favored locations from the standpoint of business taxation. Unlike all other major economies, which limit corporate taxation to income earned within the national boundaries (territorial taxation), the United States hobbles its MNCs by taxing their worldwide income.
Resource link: Corporate Tax Reform for a New Century [PDF] - 551K