Tax relief justified
By Michael Baroody
Corporate tax legislation now moving through Congress would go a long way toward making U.S. companies more competitive in the global marketplace. This is good news for the economy, for the manufacturing sector and especially for workers.
The European Union (EU) has been imposing punitive tariffs on U.S. exports since March 1. These tariffs — currently 9% — will continue to rise as long as the U.S. fails to comply with the World Trade Organization (WTO) ruling that U.S. export-tax benefits violate international law.
The U.S. economy remains heavily dependent on exports for growth and job creation, and manufactured goods represent the largest portion — about $50 billion per month. Europe is the second largest market for U.S. manufactured exports. Thus, the increasing EU sanctions on U.S. exports are a serious threat to our economy.
The pending legislation that will repeal current export-tax breaks moves us a step closer to complying with our WTO obligations and ending the punitive sanctions on a number of U.S. manufactured goods.
The sanctions are only part of the problem. U.S. corporate-income-tax rates are much higher than those in other countries, putting us at a distinct disadvantage in global competition. Right now, U.S. corporations pay combined federal and state income taxes at an average rate of 40%. This is significantly higher than rates averaging about 30% for the 30-nation Organization for Economic Cooperation and Development, the EU and Asia-Pacific countries.
For manufacturers alone, the U.S. corporate-tax burden reduces cost competitiveness by 5.6%, according to a recent study by the Manufacturers Alliance/MAPI and the National Association of Manufacturers.
The tax relief moving through Congress includes an extension of the vital research-and-development tax credit, a number of international tax reforms, a temporary incentive to invest foreign profits in the U.S., reduced taxes on domestic-manufacturing income and enhanced investment incentives for small businesses. It will help ease this tax burden, making U.S. companies more competitive in the global marketplace.
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