The corporate tax rate for American companies still stands at 39% if you include taxes at the state level — we still have the dubious distinction of leading the world when it comes to the highest business tax rates.
POTUS ON TAXES: President Trump reinforced his administration’s tax priorities during his Tuesday night address to a joint session of Congress, explaining that “right now, American companies are taxed at one of the highest rates anywhere in the world. My economic team is developing historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone.” Focusing on the importance of international tax competitiveness, the president specifically reiterated that “we must create a level playing field for American companies and workers.”
REAL REFORM STARTS WITH THE RATE: The RATE Coalition issued the following statement in response to President Trump’s address: “President Trump said last night, ‘Right now, American companies are taxed at one of the highest rates anywhere in the world. My economic team is developing historic tax reform that will reduce the tax rate on our companies so that they compete and thrive anywhere and with anyone.’ The RATE Coalition pledges to work with the President and his economic team, as well as leaders in Congress, to fundamentally reform the tax code. Six years ago, RATE was founded for precisely this reason—Reforming America’s Taxes Equitably. We believe that a more competitive corporate tax rate can help American companies stay in America, help create better economic conditions so that American workers have more money for themselves and their families, and help the American economy grow faster, which will put more people to work. We are grateful that the President is making tax reform one of his highest goals. And we look forward to using all of our resources as a coalition to help him achieve his goal.”
MARKET BUOYED BY HOPE FOR RATE CUTS: Wall Street analysts and investors eagerly awaited the president’s address, hoping for confirmation of his continued commitment to corporate tax rate reductions and simplification. Business Insider reports that even “the expectation for a more favorable tax rate and deregulation has lifted business and consumer confidence.” In addition to raising corporate valuations and encouraging growth, many Wall Street analysts anticipate a lower rate would encourage earnings repatriation. Business Insider cites Goldman Sachs chief US equity strategist David Kostin as predicting up to 75% of repatriated cash might well be spent on share buybacks, further fueling the growth in American stock prices. Kostin also predicts significant investments in heavy infrastructure.
TAX REFORM WORTH FIGHTING FOR: Mark A. Weinberger, Global Chairman and CEO of Ernst & Young and former Assistant Treasury Secretary under George W. Bush, argues in Forbes that “disagreement does not mean defeat,” and, despite the intraparty debate over the exact shape a tax reform package should take, “the policymakers and business leaders that I talk to all recognize that 2017 represents a once-in-a-generation opportunity for major tax reform that will boost economic growth, create jobs and raise wages.” If America is to be globally competitive, Weinberger warns, “we cannot afford to lose sight of the primary goal – getting competitive business tax rates and putting in place a modern international tax system that will attract global capital and add U.S jobs, this year.”
STATE RATE UPDATE: As the Illinois legislature considers a budget package that would raise corporate income tax rates from 5 to 7 percent, Tax Foundation Economist Nicole Kaeding warns that “overall, Illinois being the fourth-highest rate if this budget deal was to go through, [this] would make the state very uncompetitive both in the region and nationally.” Meanwhile, State Senator Eric Brakey of Maine has a bold proposal running in the opposite direction: stimulating business and enterprise in the state by eliminating Maine’s business income tax completely.
LOW, LOW U.K. RATES ON THE HORIZON?: U.K. Prime Minister Theresa May has raised eyebrows in Europe, with her suggestion that she might accelerate the cutting of the British corporate income tax rate, which is already set to fall from 20 percent to 17 percent by 2020. The Prime Minister suggested even larger cuts could be implemented to retain and attract business, and British Finance Minister Philip Hammond has further argued that such cuts might be advanced as a retaliatory action in the event of steep E.U. tariffs following the U.K.’s exit from the European Union. “The British people are not going to lie down and say, ‘Too bad, we’ve been wounded,’” Hammond warns.
WE WANT TO KNOW: Can the 115th Congress and President Trump successfully tackle Tax Reform in 2017? Log on to our Facebook page and let us know what you think!
AND, REMEMBER THE RATE PLAN: The U.S. corporate tax rate is already the highest in the world, which is why we believe our plan to fix the tax code, to set the corporate tax rate at a globally competitive 25% or less, to close tax loopholes, to keep American companies in America, and to enable the U.S. economy to grow resulting in a higher standard of living for American workers is the best path forward.
CONTACT US: For questions or for additional resources, please contact Michael DiRoma of The RATE Coalition and QGA Public Affairs at firstname.lastname@example.org.