WE WANT THEM TO HAVE REVENUES, NO?:

Progress on Overhaul of Corporate-Tax Rules (JOHN D. MCKINNON, 1/15/11, WSJ)

The U.S. corporate tax code has a couple of features some big corporations have found increasingly troublesome. It has one of the highest rates in the industrialized world, at 35%, a result of widespread tax-rate reductions by other countries. And it is one of the few big economies that seeks to tax corporate income earned outside its borders when it is brought back home.

Those policies have disadvantaged many U.S. firms in the global marketplace, according to numerous critics. The high U.S. rate also has made the U.S. relatively unattractive to investment, both for U.S. firms and for foreign companies, these critics say.

Skeptics note that many U.S. companies pay effective tax rates that are well below the official rate, thanks to a variety of specific breaks, as well as sophisticated planning aimed at shifting income to low-tax countries.

Passing legislation on the tax code's rates and other issues is likely to prove difficult. President Barack Obama has said that changes to U.S. corporate-tax rules must not cut revenue significantly, and worsen the nation's already-grim budget outlook. Instead, he has said a corporate-tax overhaul must be basically revenue neutral.

Just lowering the corporate tax rate is expensive in budgetary terms—it costs the government about $120 billion over 10 years for each percentage point it is reduced, according to government estimates. Giving up world-wide taxation of corporate income and moving to a so-called territorial tax system, where only income generated in the U.S. would be taxed, likely would add significantly to the cost.

All the UR does is cut taxes.

Posted by Orrin Judd at January 15, 2011 7:56 AM