Tax Reciprocity Won’t Make America More Competitive
Jack lays out the case against tax reciprocity in Reason
Tax reciprocity is back in the economic conversation, based on the claim that American companies pay too much in taxes abroad. In an interview with Bloomberg, White House economic advisor Kevin Hassett said that President Trump “[wants it so] America is on a level playing field again.”
The problem is that American companies were never on an unfair playing field. The tax revenue American companies generate abroad is a testament to American economic strength. In his new piece at Reason, Jack lays out the argument against reciprocity and for American economic dynamism.
Rather than seeking to impose reciprocal taxation measures—which would amount to mimicking the high-tax policies of other nations—the U.S. should embrace the very advantages that make it an economic powerhouse. The push for reciprocity is, in effect, an argument for adopting the economically restrictive and burdensome policies that have hindered growth in other countries. Nations that impose excessive taxes on U.S. firms do not do so out of strategic brilliance. Their high-tax regimes reflect a defensive, revenue-driven approach to economic policy rather than one based on fostering innovation and growth.
Reciprocal taxation is just adopting the overly restrictive and burdensome economic policies that have hindered growth in the very countries the Trump Administration is concerned about. Countries that put excess taxes on American companies do so from protectionism-oriented policy, rather one aimed at promoting economic growth.
These policies are not evidence of fairness or sound governance; they are a sign of economic defeatism. Governments that chose taxation over competitiveness to prop up inefficient domestic industries should not be imitated.
The U.S. economy has thrived because our regulatory and tax system supports entrepreneurship and investment. Tax reciprocity would undermine this advantage.
Read the full piece here.