Indiana Cuts Corporate Income Tax…Will Feds Follow?
Posted on Tuesday, June 21, 2011
This session, one of the General Assembly’s greatest accomplishments was to cut Indiana’s Corporate Income Tax. Despite the challenge of crafting a state budget at a time when state revenues are significantly depleted and the number of other difficult issues the legislature faced during the legislative session, legislators recognized the importance of this initiative and took action this year.
House Bill 1004 reduces the corporate income tax from 8.5% to 6.5% over four years beginning in FY13. The legislation was in response to a recommendation of the Economic Development Summer Study Committee which found that reducing corporate income tax was one of the most important things our state could do to promote job growth and economic development.
Previously, Indiana had approximately the 10th highest corporate income tax rate in the country. Fortunately, our overall tax climate has kept us competitive. But are Indiana’s actions in vain if the federal government doesn’t take action soon?
The Tax Foundation released an article today suggesting that Washington lacks a sense of urgency in cutting US corporate tax rates. There is near unanimous bipartisan agreement in Washington that the US corporate tax rate is out of step with rates of most industrialized nations and America’s global competitiveness is suffering as a result. The following economic benefits were cited as benefits to cutting the corporate tax rate:
* Cutting the corporate tax rate will promote higher long-term economic growth * It will improve U.S. competitiveness * It will lead to higher wages and living standards * Lowering the corporate tax rate will boost entrepreneurship, investment and productivity * Cutting the corporate rate also lowers the tax burden on low-income taxpayers and seniors * Cutting the rate will lower the overall dividend tax rate and taxes on capital * Cutting the corporate tax rate can attract foreign direct investment * It will lead to lower corporate debt and reduce the incentives for income shifting * Cutting the corporate tax rate can reduce compliance costs * And it can help the states compete globally
Source: Scott A. Hodge, “Ten Benefits of Cutting the U.S. Corporate Tax Rate,” Tax Foundation, May 2011.
Posted in Advocacy
