Tax bill good for middle class

Tension in Washington is high as Republicans ponder the proposed tax bill. On it rides the success of the Trump presidency. Pass it, and he’ll get a second term. Fail to do so, and it’s anyone’s guess what happens next.

The bill is good news for most middleclass Americans. More important, it’s a jobs bill, because it will give firms an incentive to invest in the United States. At present, America’s federal corporate tax rate of 35 percent is one of the highest in the world, and if you add in state taxes it’s 39.1 percent on average, the highest rate in the Group of 20 major and emerging economic powers, and 10 percent above its average rate. By comparison, in Canada … the federal rate is 15 percent, and 10.5 percent for small business, and that should be the model. There’s a worldwide competition for investment dollars, and all other things being equal they’re going to flow to low-tax countries.

What’s worse, the high U.S. rate has given American multinational firms an incentive to leave foreign earnings offshore. An American firm that generates profits from a Canadian subsidiary will pay the lower Canadian rate if it reinvests the money in Canada, but if the profits are reinvested in the U.S. they’ll be taxed at the full U.S. rate. So multinationals have an incentive to leave money abroad, and that means fewer jobs for American workers.

The bill also offers a tax repatriation holiday, under which American firms with money parked abroad could bring it back and pay a tax rate of just 10 percent. CNBC reports that American firms have left$2.6 trillion in foreign subsidiaries. That amounts to nearly 14 percent of U.S. GDP. If firms had an incentive to reinvest the money here, think what this would mean for American jobs.

— F.H. Buckley, professor at George Mason University’s Scalia Law School, writing Monday

in USA Today.