New York, Feb. 1, 2011— The $14 trillion national debt pales in comparison to what may lie ahead, says Professor Michael Graetz.
Graetz, the Isidor and Seville Sulzbacher Professor of Law, and Columbia Alumni Professor of Tax Law, said left unchecked, the debt could balloon to $20 trillion in nine years.
“This really threatens the U.S. standard of living, it threatens the dollar as a world currency,” said Graetz, one of the world’s leading experts on tax policy.
During a recent forum on reforming international tax rules at Georgetown University Law Center, he said “We’re very fortunate that not only are interest rates extremely low, but that the euro is in such a mess that there’s no good alternative at the moment to the dollar, but that won’t last forever.”
Much of the discussion revolved around the corporate tax, which Graetz said has too high a rate.
“The corporate tax is a terrible tax economically. The problem is it’s a very good tax politically, because everybody believes somebody else pays it,” he said.
As part of a plan for a sweeping overhaul of the U.S. tax system that includes a national sales tax that would eliminate the income tax for most Americans, Graetz would lower the corporate tax rate from 35 percent to 15 percent to match the rates on capital gains and dividends and be more competitive with other industrialized nations with lower rates.
In his book 100 Million Unnecessary Returns, Graetz said a lower corporate tax rate would make the U.S. a more attractive destination for investment, bring increase jobs, and diminish the payoff from corporate tax planning that often involves shifting money overseas.
“The idea that you should be collecting tax from the corporate level and not the individual level is no longer appropriate, given the global economy,” Graetz said.
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