A U.S. corporate income tax rate of 20 percent would have kept 4,700 companies in the United States from 2004 to 2016, a new study by the Business Roundtable study concludes.
Further, a 20 percent rate would have also led to U.S. companies acquiring $1,205 billion in cross-border assets during 2004-2016, the report found. The study, conducted for the Business Roundtable by accounting firm Ernst and Young (EY), adds that the current tax code contributed to the United States losing $510 billion in business assets to foreign companies.
“The U.S. tax system continues to represent a serious disadvantage to U.S.-based companies and this country’s economy,” Mark Weinberger, global chairman and CEO of EY and chair of the Business Roundtable Tax and Fiscal Policy Committee, said. “The United States is losing business headquarters along with good-paying jobs, assets, and innovation because of its outdated, anti-competitive tax code. Cross-border transactions are not inherently bad, and capital should flow to the highest returns regardless of country borders. However, a country’s tax system should not drive investment outside its borders.”
The analysis also revealed that the rate of foreign acquisitions of U.S. companies has accelerated over the past three years. From 2004 through 2013, U.S. companies were the acquirer in 18 percent of cross-border M&A transactions and the target in 20 percent of cross-border M&A transactions, as measured by value. From 2014 through 2016, the U.S. acquisition rate decreased to 16 percent, and the U.S. company target rate increased to 31 percent by value.
“If the competitive disadvantages in the U.S. corporate tax system are allowed to persist, they will cause increasingly long-lasting damage to U.S. job creation, wages and living standards,” Joshua Bolten, president and CEO of the Business Roundtable, said. “Multinational companies make an essential contribution to the U.S. economy and employment, and long-overdue tax reform would encourage them to invest even more in the United States.”
Weinberger said the study is evidence that Congress and the Trump Administration should enact tax reform to keep and attract companies.