Tax Reform Has China Vexed

Dec 12, 2017 - 2:15pm

Senior Editor, Digital Content

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Media wait for President Donald Trump and China's president Xi Jinping to arrive for a news conference in Beijing, China.
Media wait for President Donald Trump and China's president Xi Jinping to arrive for a news conference in Beijing, China.

U.S. tax reform is garnering attention from one of our competitors.

The Wall Street Journal reports China is worried Congress' work on tax reform is a threat to its global competitiveness by making the United States “a more attractive place to invest." [subscription required].

Making the U.S. more competitive is one of the biggest reasons we need tax reform.

More from the Journal:

An official involved in Beijing’s deliberations called Washington’s tax plan a “gray rhino,” an obvious danger in China’s economy that shouldn’t be ignored. “We’ll likely have some tough battles in the first quarter,” the official said.

While the tax overhaul isn’t directly aimed at Beijing, it is another way China will be squeezed.

Under the tax plan now going through the U.S. legislative process, America’s corporate levy could drop to about 20% from 35%. Over the next few years, economists say, that could spur manufacturers—whether American or Chinese—to opt to set up plants in the U.S. rather than China, where total tax burdens on companies are among the highest of major economies.

As Caroline Harris, Chief Tax Counsel and Vice President, Tax Policy at the U.S. Chamber explained earlier this year:

Our combined marginal corporate rate of 39.1% is exceeded only by the United Arab Emirates and pass-thru entities face tax rates that exceed 50% in some states. Not only are our rates global outliers, over the past 15 years all other countries have significantly lowered their rates — so simply by standing still we are falling further behind.

By lowering tax rates and moving to a territorial system, the tax reform taking shape in Congress would spur more investment in the U.S., leading to higher levels of productivity and higher wages for American workers.

 

The world has seen years of subpar U.S. economic growth. They now fear what our economy is capable of when we lift the weight of our uncompetitive tax code.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.