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Sunday’s French election results in which the former Socialist Finance Minister, Emmanuel Macron, running as a centrist took first place and will face off against nationalist populist Marine Le Pen may have a little appreciated consequence for tax reform on this side of the pond. The French, perhaps surprisingly enough, “get it.”
France’s top corporate tax rate, already slated to drop from 33% today to 28% in 2020, would under Mr. Macron’s program fall to 25%. If even former French socialists grasp the importance of competitive business tax rates, presumably a large majority of American policymakers will figure it out, and Congress will respond accordingly, and quickly.
As often noted, when the Federal and average state corporate income tax rates are combined, the U.S. rate approaches 39% according to the OECD, giving the U.S. the highest statutory corporate income tax rate in the industrialized world. The tax rate on non-corporate business is similarly out of line with the rest of the world. Even Bill Clinton during the recent campaign argued for a lower corporate tax rate. “I think it [the corporate tax rate] should be lowered.” Nor was this just a slip during the campaign. In 2011, Clinton argued, “We should cut the [corporate income] tax rate to 25 percent, or whatever is competitive.”
Not that Bill Clinton is the nation’s leading authority on tax policy, but when the popular former Democratic president and husband of the recent Democratic nominee for president argues for a lower tax rate, surely substantial rate reduction is something worthy of strong bipartisan support.
Amazingly, some Democrats remain leery of the whole proposition. They need to get over it and join the conversation, or risk demonstrating they understand less about economic policy than a French socialist. By the way, the Socialist Party candidate, Benoit Hamon, whose predecessor recently served as France’s president, received just over 6% of the vote
When the leading candidate for the French presidency argues the French rate, already well below the U.S. rate, is still too high and must come down, it’s a good indication Bill Clinton was right and that high U.S. tax rates have and continue to weigh heavily on American job creation and wage growth. The French get it. Bill Clinton gets it. Get it?
When President Trump lays out his ideas on tax reform, Congress should take this as the shot of a starting pistol and push relentlessly forward on pro-growth, comprehensive tax reform. Whether the race turns out to be a sprint as some hope, or a marathon as some fear, the point is this is one race the United States cannot afford to lose.