Wednesday, February 2, 2011

The U.S. Corporate Tax System

Our corporate tax system is a disgrace that is a macroeconomic problem of unknown scale.

It’s a disgrace because we now have the highest official corporate tax rate in the developed world. Yet, our system is full of loopholes for politically connected firms.

It’s a macroeconomics problem because corporations have gotten so good at shifting their taxable income to lower tax locations. Most of this shifting of income does not entail shifting of jobs, but some of it does (FYI: SUU has placed 2 economics majors in high paying jobs in this field in the last 5 years).

It’s a problem of unknown scale because the system is such a mess that it isn’t really possible to compare it statistically to an alternative: it’s so bad we can’t tell how bad it might be.

Some of these issues are touched on in David Leonhardt’s column this week in The New York Times entitled “The Paradox of Corporate Taxes”.

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