Current Corporate Tax Rates Inhibit Economic Growth, Professor Michael Graetz Tells Senate
Current Corporate Tax Rates Inhibit Economic Growth, Professor Michael Graetz Tells Senate
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New York, March 8, 2011—At a Senate hearing Tuesday on whether the tax system promotes job creation and economic growth, Columbia Law School Professor Michael Graetz said the answer is no, at least not now.
“The United States needs domestic investment by both foreigners and U.S. citizens,” said Graetz, the Isidor and Seville Sulzbacher Professor of Law, Columbia Alumni Professor of Tax Law. “We are now in a situation where corporations and other investors …. can move money quickly and easily around the world with the click of a mouse.”
Speaking before the Senate Finance Committee, Graetz said onerous international tax rules provide “an incentive for people to borrow here and ship income abroad. This is exactly backwards, in my opinion.”
Graetz said the current system of corporate taxation is a “bad way to attract capital” into the U.S. He added that high corporate taxes ultimately hold down wages and slow job growth, despite the public perception--which Graetz maintained is fueled by Congress---that large multinational corporations bear the brunt of the tax burden on their own.
Instead, Graetz has proposed promoting investment by lowering the corporate tax rate from 35 percent to 15 percent, which would be among the lowest in the world, as part of a broader tax plan outlined in his book 100 Million Unnecessary Returns.
The corporate tax scheme is part of a broader tax reform plan highlighted by the imposition of a national consumption tax—in effect, a national sales tax--that Graetz said would eliminate the income tax for as many as 150 million Americans, and lower rates for the rest of filers.
“We are tying our hands behind our backs by relying only on an income tax,” Graetz said. “We are a low tax country, but we are not a low income-tax country.”