Railing against corporations that leave America to relocate to another country is a winning tactic. Republican presidential candidate Donald Trump has fully endorsed this strategy during his stump speeches. When speaking about American business expats, he recently told supporters at a campaign rally in New Hampshire, “You can tell them to go f*** themselves.”
Many economic factors, stretching from labor costs to regulatory burdens to foreign demand, have led U.S. companies to move some or all of their operations out of America. But one of the main causes, especially when it comes to relocating a corporation’s headquarters abroad, is America’s internationally uncompetitive corporate-tax system.
The fault lies with the federal government, not corporate managers fulfilling their legal duties. Despite Trump’s rather heated rhetoric, his own tax plan shows that he fully understands this cause when he is not tossing applause lines to his supporters.
America’s combined federal and average state corporate-tax rate of 39 percent is the highest in the developed world. But it was not always this way. America missed the global party when it came to lowering corporate tax rates.
Since 1988, the average corporate-tax rate for 34 Organisation for Economic Co-operation and Development countries has fallen from 44 percent to 25 percent. Over that time, the U.S. rate actually increased. Even the Nordic countries that Democratic presidential candidate Bernie Sanders so admires have lower corporate-tax rates than America does. Finland has a corporate tax rate of 20 percent, Sweden’s is 22 percent, and Denmark’s is 24 percent.
American companies also have to pay federal taxes on the income that they earn overseas if they bring that money back to America. This is the case even though these earnings were already taxed by another country. Besides the United States, only five other OECD countries tax corporate income earned outside their borders, down from 19 in the 1990s.