We have an uncompetitive federal corporate tax rate of 35 percent compared to Canada’s 15 percent. Our Roth IRA is inferior to Canada’s TFSA, as Amity Shlaes and I discussed in the Wall Street Journal. And while Serena Williams still tops rising star Eugenie Bouchard, we should be paying attention to ”What Canada Can Teach Us About Tennis.”
Large government projects often double in cost between when they are first considered and when they are finally completed. This pattern—call it “Edwards’ Law”—is revealed in story after story about highways, airports, computer systems, and other types of government infrastructure.
News outlets are running stories about the rise in corporate tax inversions. Inversions are financial reorganizations that place U.S. firms under foreign parent corporations. They are one of the many ways that companies are responding to America’s uniquely high corporate tax rate.
President Obama is not doing enough to rein in spending and deficits. He says the deficit has been cut in half since he came to office. But that is a cut from the giant 2009 figure of $1.4 trillion, which was so high partly because of his costly stimulus bill.
Numerous responses to my article in the New York Times yesterday about corporate tax inversions indicated a lack of understanding. Related articles by Levin, Johnston, and Huang similarly suggested that further enlightenment is needed.
The corporate inversion trend tells us that global tax competition is intense and that U.S. tax reform is long overdue. Our combined federal-state corporate tax rate of 40 percent is far higher than the rates of our trading partners. Inversions are a bid by companies to create self-help tax reform while Congress sits on its hands.
Paul Light of Brookings and NYU is a top expert on the federal bureaucracy. He has a new study on federal government failures over the 2001 to 2014 period.
Most politicians are optimistic about the government’s ability to intervene and solve problems. That’s one reason why they run for office. Neocons, for example, have excessive faith that foreign intervention can fix the world, while liberals embrace the misguided idea that subsidies and regulations can boost the economy.
The technical arguments against the Export-Import Bank are provided in this excellent summary by Veronique de Rugy. However, one argument against Ex-Im and other business subsidies is not stressed enough in policy debates: subsidies weaken the businesses that receive them.
Congress faces gridlock on many issues until after the November elections, but a transportation bill is still high on the agenda, because the federal Highway Trust Fund (HTF) will soon run out of money after years of elevated spending. Congress will probably put a bandage on the HTF to get it through this year, but eventually it will have to choose between tax increases and spending cuts.