Taxes: As the president complains once again that oil companies are getting unfair tax breaks, the U.S. passes Japan as the leader in business taxes. Workers, investors and entrepreneurs will bear the cost.
On April 1, Japan will cut its corporate tax rate to 36.8% from 39.5%. This includes a 10% surtax that will expire in 2014. As it does, the U.S. will officially have the highest corporate tax rate in the world, with average combined federal and state profit levies of 39.2%. And, no, this is not an April Fools' joke.
The news comes after President Obama once again said oil company profits justified ending $4 billion in "subsidies" and shifting the money to research on clean-energy fuels.
Except there's no money to shift since the $4 billion is simply money the government doesn't take in the first place under incentives available to all manufacturing companies, from Apple to President Obama's favorite company, General Electric.
Just as we are the only industrial country not fully developing its domestic energy resources, we are the only country not slashing its corporate taxes. Great Britain was to cut its corporate tax rate on April 1 to 24% from 26% and will cut the rate again to 23% in 2013.
On Jan. 1 of this year, Canada cut its federal corporate tax rate to 15% from 16.5%.
Canada's combined rate is 26% when the average rate of the Canadian provinces is added to the federal rate. Coupled with an unfettered energy development policy, Canada's tax policy creates a low-cost, business-friendly environment, unlike the America that Obama is fundamentally transforming into a socialist command-economy that tilts at windmills.
It was the final link in Canadian Prime Minister Stephen Harper's pro-growth Economic Action Plan. There is no railing against corporate greed and oil companies north of the border.
"Creating jobs and growth is our top priority," says Finance Minister Jim Flaherty. "Through our government low-tax plan ... we are continuing to send the message that Canada is open for business and the best place to invest."
Canada understands that to create growth you must let the risk takers reap the rewards of success. On the flip side, you don't bail out the failures.
Neither do you try to pick winners and losers. You let the free market do that. The way to create revenue growth is to increase the tax base, not the tax rates.
Canadian policy favors those who pull the wagon rather than those who ride it. It also favors the creation of wealth rather than the redistribution of it.
"The Harper government has pursued a strategic objective to disembed the federal state from the lives of citizens," wrote University of Calgary professor Barry Cooper in the Calgary Herald.
Sounds like a plan to us.
According to "Paying Taxes 2012," published by the World Bank and PricewaterhouseCoopers, there have been 133 major corporate tax cuts globally since 2006. From 2006 to 2010 alone, more than 75 nations cut their corporate tax rates — some more than once.
A chart produced by the Tax Foundation using OECD and IMF data shows that while our corporate tax rate has remained as flat as our economy, the rest of the world has discovered that lower corporate tax rates are good for business and economic growth.
When you tax something, you get less of it, particularly when you're talking about economic activity.
Corporations in fact do not pay taxes, but pass on money to the government that comes from higher prices for their goods and services, lower wages and benefits for fewer workers, and lower dividends to their stockholders and investors.
Yet the Obama administration, bucking a worldwide trend, continues to fixate on the distribution of the golden eggs rather than the health of the goose.
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