WASHINGTON Rep. Scott Tipton is pushing forward on his campaign promise to turn the economy around by introducing legislation on Tuesday that would cut the federal corporate income tax rate to 10 percent from 35 percent, a rate that is among the highest in the developed world.
Tipton, R-Cortez, said the bill which would also lower capital-gains and dividends taxes to 10 percent would attract business investment in the United States and spur job creation.
In order to get this economy moving, we have to get Americans back to work, he said in a phone interview. Weve been driving American jobs, American opportunities, off of our shores.
Many tax policy analysts argue that a high corporate income-tax rate creates a number of economic woes including creating disincentives for saving and investment.
The combined state and federal corporate tax rate for the U.S. was at 39.2 percent in 2010, a rate that is the second highest rate of all countries in the Organization for Economic Cooperation and Development, a group of 34 economically developed countries.
The U.S. trailed behind only Japan, which had the highest rate at 39.5 percent, but which plans to lower its rate 5 percent in April.
However, some argue that the effective tax rate the tax rate after exemptions, deferrals and tax credits are accounted for is a much more important economic indicator than the statutory tax rate, and not all experts agree on that number and whether it is too high.
Michael Knoll, who is the co-director of the Center for Tax Law and Policy at the University of Pennsylvania Law School, said that Tiptons legislation could help spur job creation, but with caveats.
I would tend to agree that lowering the corporate tax rates certainly would encourage more investment and jobs in the United States, he said. On the other hand, we certainly need the revenue. So if were going to reduce taxes somewhere, we ought to make it up somewhere else.
Tipton, however, said that cutting taxes did not necessarily mean the government would lose revenue. He said that capital-gains tax revenues increased when President Ronald Reagan and President Bill Clinton reduced the capital-gain tax rates, and that those tax cuts helped create jobs and entrepreneurial capital.
Thats exactly what this economy needs right now, he said.
The legislation is the first that Tipton has introduced in Congress.
His press secretary, Josh Green, said that the introduction of the bill was prompted in part by unemployment figures released by the Colorado Department of Labor and Employment last week. Those figures showed that although 2,200 jobs were added in Colorado between December and January, unemployment increased from 8.9 to 9.1 percent in the same period.
Karen Frantz is a student at American University and an intern for The Durango Herald. She can be reached at firstname.lastname@example.org