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Business columns: Why Obama should cut business taxes

Cutting the corporate tax rate from 35 percent to 25 percent would largely eliminate the advantage that corporations in low-tax countries have over U.S.-based companies, said<strong> </strong>Michael<strong> </strong>Mande

Michael MandelBusinessWeek

President Obama’s recent proposal to crack down on U.S. companies that hide profits in overseas tax havens is well-intentioned—and completely hopeless, said Michael Mandel. The U.S. has long battled corporations over their overseas profits, and all these efforts have gained us is “a system no one understands that requires vast resources to administer while raising very little revenue.” Obama’s proposals will add even more complexity—and quite possibly shift jobs overseas.

A more effective strategy would be to cut the corporate tax rate from 35 percent to 25 percent. Doing so would largely eliminate the advantage that corporations in low-tax countries have over U.S.-based companies, giving businesses an immediate incentive “to locate high-end research, planning, and marketing jobs in this country.” A lower tax rate would also extricate the U.S. from the no-win game of “chasing profits across national borders.”

The obvious objection to this plan is that it would result in lower federal revenues—but probably by no more than 3 percent. “At a time when jobs are disappearing by the millions,” slashing taxes to keep jobs at home makes a lot of sense.

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