Tax reform is a lot like the weather-everyone talks about it but no one seems to do anything about it. Incoming Treasury Secretary Henry Paulson could change that by focusing on the need for corporate tax reform.
Congress should not ignore the tax rules governing individuals, but modernizing America’s business tax system is critical to promoting growth, creating jobs and narrowing the budget deficit. In deciding how best to proceed, Secretary Paulson and Congress must recognize four things.
First, America’s Tax System Must Be Competitive. Every day we make choices based on cost: If gasoline is selling for 10 cents less on the left-hand side of the street than on the right, few of us turn right to fill up the car. Similarly with taxes: They are a cost that a business rightly considers as it locates new plants, creates distribution networks and hires workers. Taxes are not the only or most important cost to be considered, but they do matter. The U.S. system must change to remain competitive.
Second, Tax Rates Matter. A critical aspect of tax competition is the tax rate. Regrettably, while individual rates have been reduced, the corporate rate...
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