While there has been much hue and cry about corporate tax inversions in recent weeks, the inversions actually "have benefits for the American economy," Diana Furchtgott-Roth, senior fellow at the Manhattan Institute, writes on
MarketWatch.
Under inversions, U.S. companies buy foreign companies and then domicile overseas. The idea is to avoid U.S. corporate taxes, which at a top federal rate of 35 percent are among the highest in the developed world.
"They [tax inversions] make it easier for companies to invest in the United States. They raise profits for U.S. shareholders, who can channel more funds back to America," Furchtgott-Roth says.
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"Companies that locate overseas should be praised for making the right decision, not scolded for being un-American. What is more American than doing what is best for your company?"
She was referring to comments from President Barack Obama that tax inversions are "unpatriotic."
So what's the solution? "Get rid of the corporate tax altogether and raise taxes on corporate distributions such as dividends and capital gains," Furchtgott-Roth writes.
To be sure, some economists don't think corporate taxes should even be cut, let alone eliminated.
They note that corporate taxes total only about 2 percent of GDP.
"The idea that lowering the corporate tax rate will lead to more investment is fundamentally wrong," Nobel laureate economist Joseph Stiglitz of Columbia University told
The New York Times.
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