Thursday, May 08, 2008

Corporate Income Taxes

Alan Viard has a great article on the corporate income tax at AEI.

In recent years, governments around the world have slashed corporate tax rates--with the average rate falling from 38 to 27 percent from 1992 to 2006 in a large sample of countries--in response to global competitive pressures. Fearing that governments will lose a valuable revenue source, some observers have called for international cooperation to protect the corporate income tax from competitive pressures. These calls should be rejected. The corporate income tax causes needless distortions by penalizing saving for the future and penalizing particular kinds of financial securities issued by particular kinds of firms. Rather than colluding to maintain the corporate income tax, countries should switch to better-designed revenue sources.

Viard's argument is persuasive. Read the entire article.

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