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Taxes_as_a_Competitive_Advantage_in_the_Global_Economy
| Taxes as a Competitive Advantage in the Global Economy
Building an ownership society in a tax competitive world. Like
many fellow citizens of this great country, I listened to the
President’s Inaugural Address on January 20th. It was
interesting, but it just flowed over me with nothing really
sticking out in my mind until I heard the words, “building an
ownership society.” As my life pressed forward, those words
stuck with me as great sounding but with nothing to connect them
to anything until I read Glenn R. Simpson’s article, “As Europe
Cuts Corporate Tax, Pressure Rises on U.S. to Follow” in the
January 28th edition of the Wall Street Journal online. Those
words came back to mind and I promptly went on line to find that
section of the Presidents speech and offer it below:
“In America's ideal of freedom, citizens find the dignity and
security of economic independence, instead of laboring on the
edge of subsistence. This is the broader definition of liberty
that motivated the Homestead Act, the Social Security Act, and
the G.I. Bill of Rights. And now we will extend this vision by
reforming great institutions to serve the needs of our time. To
give every American a stake in the promise and future of our
country, we will bring the highest standards to our schools, and
build an ownership society. We will widen the ownership of homes
and businesses, retirement savings and health insurance -
preparing our people for the challenges of life in a free
society. By making every citizen an agent of his or her own
destiny, we will give our fellow Americans greater freedom from
want and fear, and make our society more prosperous and just and
equal.”
I love the sound of the words, “ownership society,” but having
recently written about how overhead burdens in this country are
driving businesses overseas, I didn’t understand how this could
happen until I read the Journal article and now my hope is
soaring.
Simpson begins the Journal article with, “European countries
have been steadily slashing corporate-tax rates as they vie for
foreign investment, potentially adding to pressure on the U.S.
for similar cuts as it weighs a tax overhaul.” Examples of what
is happening in Europe can be seen in the following table: Tax
Rate Changes in the last few years. BeforeAfterReduction
Ireland24.0%12.5%11.5% Netherlands34.5%31.5%3.0%
Portugal37.0%27.0%10.0% Austria34.0%25.0%9.0%
Germany56.0%38.3%17.7% Poland27.0%19.0%8.0% U.S.40.0%
The article points out that while many large U.S. businesses use
loopholes and shelters to pay far less than the national rate
suggested, even the effective rate is still as much as 10% above
Europe’s average. The result is that Europe is addressing the
overhead issue via tax reductions to woo U.S. companies to
expand in Europe rather than at home. This potentially moves
jobs and revenue offshore.
We truly are in a global economy and must compete in that global
economy not only for customers and revenue, but now governments
are competing for business and jobs in their countries. It’s a
beautiful thing.
The last major rate reduction in the U.S. corporate rate came in
1986. Since then deductions and shelters have proliferated and
businesses have become more adept at creating profits offshore
rather than at home to avoid the high tax rates. For example, in
1999 U.S. Companies reported $13.3 billion in profits in
Ireland. With the tax reduction in Ireland, profits in that
country have jumped to $26.8 billion in 2002.
Europe is becoming much more business friendly and if the U.S.
wants to increase jobs and tax revenues, they are going to have
to become much more competitive from a tax standpoint.
The words “ownership society,” the journal article and my
article, “The Overhead is Killing US” all merged together in my
mind to paint a very different picture of a potential future for
the U.S. and the World. If governments are awakening to the idea
that businesses create profits and jobs (without which there are
no tax revenues), then maybe there is hope that the world is
changing and the resulting competition by governments will make
the possibility of an “Ownership Society” a very real
possibility.
Copyright Bob Cannon/The Cannon Advantage, 2005. All
rights reserved.
This article courtesy of http://www.cannonadvantage.com. You may
freely reprint this article on your website or in your
newsletter provided this courtesy notice and the author name and
URL remain intact.
About the author:
Bob Cannon helps visionary leaders make decisions that gain a
competitive advantage. Check out other interesting articles
available in the Taking Aim newsletter available at
www.cannonadvantage.com . Bob can be reached at (216) 408-9495
or mailto: bob@cannonadvantage.com
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