A good April Fool's prank is funny and harmless; the reality which set in last Sunday, however, was neither. On April 1, our corporate tax rate became the highest in the world after Japan officially lowered its rate to 38 percent. With unemployment and business growth still at unacceptable levels, our 39.2 percent combined federal and state rate is something no one finds amusing.
Many over the past year have been clamoring for higher taxes on businesses out of a purported interest in “fairness.” But the facts simply don't support this argument. American businesses are already taxed by their government more than any companies in any other country in the world. Our tax policy actually encourages them to move overseas. Lowering the corporate tax rate could not only give these businesses reason to return home, but it would encourage Americans to open more new businesses and create more jobs here at home.
Don't be fooled by the tax's “corporate” name – cutting the corporate tax rate would benefit American workers and families. According to several studies, lowering our rate to 25 percent, a level comparable with Canada and the United Kingdom, would lead to the creation of more than 500,000 jobs annually and would free up hundreds of billions of dollars for American enterprise. At 25 percent, studies suggest that a family of four would see its annual after-tax income rise by nearly $2,500 due to job creation and higher wages.
A recent Bloomberg study found Nebraska to be the best tax environment for new businesses. In part by providing a favorable tax environment to encourage hiring and investment, Nebraska enjoys one of the lowest unemployment rates nationwide. And still Nebraska always balances its state budget. In 2010, Nebraska was the only state to have two cities in both of Forbes Magazine's Top Ten lists: "Most Livable Cities," and "Places for Business and Careers."
Some try to reinvent history by saying the prolific economy we enjoyed under Ronald Reagan was a coincidence. This ignores the fact that under President Reagan, the U.S. had the sixth-lowest tax rate among developed countries.
Saddled with a stifling corporate tax rate, Washington has tried unsuccessfully to pull our country out of a recession by pouring trillions of tax dollars and borrowed money into government programs. It hasn’t worked. It's time to return those tax dollars, through a lower corporate tax rate, to entrepreneurs in the private sector. They are the people who will ultimately get our economy back on the right track.