Tax Burden in U.S. Not as Heavy as It Looks, Report Says 

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For years, chief executives have complained bitterly about the United States corporate tax code, arguing that it is too complicated and that rates are too high.

The issue has reached a near boiling point this summer as many large American companies have sought to buy smaller foreign rivals so they can renounce their United States corporate citizenship and reincorporate overseas to lower their tax bills. Others are considering the move, known as an inversion.

Edward D. Kleinbard, a professor at the Gould School of Law at the University of Southern California and a former chief of staff to the Congressional Joint Committee on Taxation, makes a captivating argument in an academic paper that the United States tax code — counter to the conventional wisdom — is not impeding global competitiveness. In fact, the opposite is true.

Professor Kleinbard argues that lower tax rates are not driving companies to inversions; instead, he contends it is all the money that companies have overseas — some $2 trillion — and don’t want to bring back to the United States despite protestations by many chief executives that they wish they could.

Professor Kleinbard suggests that companies have become so clever with “aggressive tax planning technologies” that many of them are able to take advantage of the current tax system so well that they are more competitive than their foreign rivals.

None of this is to say that our current tax system is perfect. It isn’t. Despite all Professor Kleinbard’s assertions about the way United States multinational companies use the tax system, he is one of the first to say it needs to be updated. “It is highly distortive and inefficient,” he writes.

 

Source: NYT

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