This is a compelling article on tax reform, well worth a read:
The massive scope of our broken tax code is enough to fill several college courses, and will not be solved in one blog post. But it is important to reiterate that the private sector lives under nonsensical, onerous and arbitrarily punitive burdens that would be comical if they weren’t so damaging.
Pomerleau makes a strong case for repairing our corporate tax system in the article, citing a powerful example:
For example, if an American company earns $100 in the United Kingdom, that income is subject to the UK’s standard 21 percent corporate tax rate — a tax bill of $21. Upon bringing that income back to the United States, an additional 14 percent ($14) tax would be levied by the U.S. government to arrive at the 35 percent U.S. rate.
In order to arrive at a total tax rate of at least 35 percent on foreign income and limit double taxation, a tax credit equal to the foreign taxes already paid is provided to U.S. corporations up to, but not beyond, the 35 percent U.S. rate. American companies can delay, or “defer” payment of this tax by reinvesting the earnings into the activities of their foreign subsidiaries.
This system is beyond unwieldy. It is decisively uncompetitive. On top of it all, the system has also reliably led to a chorus of reporters and policymakers eager to accuse American companies of avoiding their U.S. tax burdens or, worse, attempting to disqualify individual sectors from use of the vitally important foreign tax credit.
The White House’s frequent effort to modify “dual capacity” rules for American energy companies in a manner that would prevent them from taking a credit for income taxes paid overseas is a poster child for the compounding political and economic challenges that arise for American multinationals at the hand of our tax structure. These attacks come despite the fact that petroleum producers (along with coal producers) paid far more in foreign taxes than any other sector: $42.7 billion, or a 36.1 percent effective rate, according to our analysis.