Tax Reform Essay

1640 words - 7 pages

The United States is in a recession; it has been facing some of the worse economic times since the Great Depression in the 1930’s. One option to fix the economy is to change the corporate tax rate. To lower it or to raise it, that is the question economists have been speculating. America's high corporate tax rate and worldwide system of taxation discourages U.S. companies from sending their foreign-source revenue home, which makes U.S. companies defenseless to foreign acquisition from the international opponents (Camp). Corporations and United States citizens have been fighting for a tax reform, which would hopefully help the American economy; either by lowering the corporate tax, or by raising the tax.
The United States corporate tax rate is one of the highest tax rates in the world, at around 35 percent. Only Japan has an elevated corporate tax rate than The United States, which has a collective federal-state rate of 39.2 percent. (Camp) However, Japan has already indicated its objective to decrease its rate. Japan’s Prime Minister Naoto Kan explained the reason for the tax reduction, “By daring to go with a 5 percent reduction, we will spur companies to invest domestically, expand employment and raise wages, That will stimulate the domestic economy, support growth and shake off deflation.” (Tabuchi) Japan's new Finance Minister Jun Azumi wants to carry out a corporate tax cut as proposed by the government earlier and give incentives for Japanese firms to keep operating in the country despite the recent sharp rise of the yen. Since the proposal to lower Japan’s corporate tax rate in late 2010 unemployment has decreased from 5.1% to 4.1%, proving that corporations will higher more if taxes are lower. (Tabuchi)
The US tax rate on corporations is so large, that companies choose not to pay the taxes. Recently, Corporations have preferred to move across seas to countries with lower tax rates called tax havens to keep themselves economically competitive with other corporations headquartered across the globe. A tax haven is a country that offers foreign corporations and individuals relatively low corporate and income tax rates, with a politically and economically stable environment. Some tax havens are Switzerland, Hong Kong, Bermuda, Ireland, and the Cayman Islands. Although the businesses have moved across seas, the United States forces them to pay the corporate tax. Fortunately for the businesses, it they keep their income and money across seas they do not have to the pay the American corporate tax, Unfortunately this is ghastly for the United States Government businesses keep their products and profits over seas.
One proposal for the lowering of taxes in the United States is Herman Cain’s 999 Plan. Herman Cain is a republican politician running for president in the year 2012. The 999 Plan is a tax reform plan that would change personal income tax, national sales tax, and corporate sales tax all to nine percent. (Astor) The argument for the...

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