Currently in the U.S. corporations termed as C corporations are taxed at a rate of 35%. See IRC 11. The corporate earnings are again taxed at the shareholder level when the corporation distributes dividends to the shareholders. The problem is that no other country taxes corporations at the same level as the U.S.
This disparity in tax treatment ultimately creates problems for U.S. companies is the global markets. In fact corporations looking for bigger tax incentives might even be more willing to incorproate overseas in an effort to avoid the tax liability the U.S. puts on the corporations. With technological advances like the internet and IM, it is easy to maintain offices in the U.S. while keeping a headquarters in an overseas location.
Although critics might argue that the U.S. courts have access to better case law regarding businesses, and that overseas incorproation statutes are difficult, if the price is right a business might be willing to take the risk. In fact, some countries might even be willing to make incorporation easier in order to raise capital.
Given the current U.S. recession, perhaps it is time we thought about lowering the tax burden on corporations. The businesses might even lower the price of goods and make things more affordable. Also, keeping corproations in the U.S. lets us better monitor them and might even create jobs here. Overall, it might be best to adopt the pass through method of taxation used by other business entities and allow the corporations to operate on a more equal footing on the global market.
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