WASHINGTON – A simpler corporate tax code could be an anti-competitive, slower-growth tax code, warns a report released today by the Information Technology and Innovation Foundation.
With the Obama Administration and Congressional leaders possibly looking to eliminate a variety of corporate tax breaks as part of an eventual debt and deficit reduction plan, the report, “U.S. Corporate Tax Reform: Groupthink or Rational Debate,” warns this approach could undermine U.S. competitiveness and long-term economic growth.
“The tax simplification orthodoxy that pervades Washington’s thinking is misguided,” said ITIF President Robert D. Atkinson, the report’s author. “The record is clear. Tax incentives that increase investment in workers, equipment, IT, and innovation help boost productivity and economic vitality. Competing countries looking to take the lead in emerging industries are adopting these tools with enthusiasm. We jettison them at that our peril.”
The report dismantles the argument long made from across the political spectrum that so-called “distortions” in the tax code are costly and ineffective. It explains that merely broadening the corporate tax base and lowering tax rates will undermine U.S. companies competing internationally in vital industrial sectors. The report also dismisses the near-universal belief in revenue-neutrality, pointing out it would leave already high corporate tax burdens largely unchanged.
While recognizing that there are provisions in the tax code that merit scrutiny, the report calls on policymakers to adopt the following principles as they undertake corporate tax reform:
- Provide direct incentives for U.S.-based enterprises to invest in the building blocks of innovation, productivity and competitiveness: research and developme