There's the argument that we need to compare effective tax rates rather than statuatory tax rates, but one problem there is how the ETR is calculated. I've seen claims from "The US ETR is well below the world-wide industrial average" to "the ETR is still the highest in the world". GE's 2002-2011 tax figures would indicate someone towards the lower end.
One problem with lowering the STR, and assuming that the ETR goes down as well (not assured) is that tax revenues will decrease as a result, and another is that the other industrial countries could counter with a reduction of their own to retain the current level of capital investment in their own economy, rather than it moving to the US.
And what would it gain us? The Congressional Research Service issued a report in March 2011 that stated
"Regardless of tax differentials, could a U.S. rate cut lead to significant economic gains and revenue feedbacks? Because of the factors that constrain capital flows, estimates for a rate cut from 35% to 25% suggest a modest positive effect on wages and output: an eventual one-time increase of less than two-tenths of 1% of output. Most of this output gain is not an increase in national income because returns to capital imported from abroad belong to foreigners and the returns to U.S. investment abroad that comes back to the United States are already owned by U.S. firms. [Congressional Research Service, 3/31/11]"




Reply With Quote

