Taxation in America should change to prevent businesses from outsourcing jobs.
The primary reason that businesses move abroad is because of America’s high corporate tax rate, which at 35 percent is second only to Japan. If the U.S. can lower this to the teens, many companies would stay here.
Another issue with taxation and companies is that America is the only developed country that taxes on a worldwide basis. Most countries have territorial systems where they only tax the income made within their borders.
Still another tax problem that businesses face is depreciation of physical capital. Instead of having full and immediate ability to expand, a company can only account for so much of a physical expense a year. As Brian M. Johnson, executive director for the Alliance for Worker Freedom, stated, “A deduction delayed is a deduction denied.”
In other words, because of inflation rates, a company must wait on returns on certain expenses; therefore, a company will never receive its full payment.
Another major problem is the double taxation after taxing of corporate earnings. Companies are taxed by the corporate tax rate and, then, from the earnings that they receive annually, the companies transfer the earnings into either dividends or capital gains. The government then taxes these two items by about 15 percent.
America should change the tax rates on these two items to 0 percent so they are not double taxed.
Ryan Ellis, tax policy director at Americans for Tax Reform, estimated that not only would most American companies not outsource if the above items were enacted but also one-third of major companies in the world would insource to America.
As an official at the Congressional Budget Office stated, businesses don’t pay the taxes; human beings pay for the taxes.