One of the most troubling failures of the Republican led congress (which is no more) is their failure to substantially reform the US corporate tax code. I wrote an article that summarizes how the corporate tax is applied at an overview level and the fact that today the US is among the least competitive corporate tax regimes among developed countries. The Economist recently chimed in, too, with an article titled “Tax Reform – Overhauling The Old Jalopy” which does a decent job of summarizing the situation and stating that an average tax rate of 27% without major deductions would accomplish the same thing as our current tax rate of 34%. Not mentioned by the Economist is how this backfired on us with the Alternative Minimum Tax, when a simplified tax methodology with lower rates and a broadly applied based ended up netting millions of middle Americans, including the middle class.
All of these articles miss a more troubling trend, however – the issue isn’t as much the tax methodology applied to EXISTING companies (who have strong incentives to stay in place) but how the tax impacts NEW companies that are choosing where to set up shop and what sort of structure to utilize for their business. This photo is a cornerstone of the Accenture “Headquarters” in downtown Chicago – Accenture is the surviving consulting firm from the Arthur Andersen debacle (grist for a future post as I am an alumni) that chose to locate their headquarters in Bermuda rather than the United States, primarily to minimize their income tax burden.