To the uninformed citizen, the notion of lowering corporate tax sounds absurd. Companies like Google, Apple, Microsoft, and Cisco rake in billions of dollars in profit every year. Why in God’s name would you lower their tax rate? We should increase it!
The important thing to understand here is despite these impressive earnings and despite the current tax rate, these companies aren’t paying taxes on the vast majority of those earnings. The reason being is that tax law enables them to hoard this extra income overseas and avoid paying taxes on them.
Do you see the problem? Increasing the corporate tax rate would not do anything except encourage even more companies to abuse this same loophole. It doesn’t matter if the corporate tax rate is 40%, 50%, or even 60% because these companies are simply going to continue stockpiling funds outside the United States.
So as counter-intuitive it may sound, lowering the corporate tax rate will incentivize these corporations to repatriate these funds (bring it back to the US). By bringing it back to the United States, the corporations can use the money for whatever purpose they see fit. The point is that it’s back in our country and isn’t being used to strengthen other countries.
The example above is one of many which highlight exactly how the United States weakens itself when it comes to the global economy. Instead of allowing countries like Ireland to capitalize on these regulations, Donald Trump would prefer that the United States capitalizes on it instead.
Yes, the corporate tax rate is lower, but it doesn’t matter – because the current tax rate isn’t being applied at all. By lowering the corporate tax rate, the US government ends up receiving more tax revenue while also strengthening its own economy. Two birds with one stone.