For years, chief executives have complained bitterly about the United States corporate tax code, arguing that it is too complicated and that rates are too high. The issue has reached a near boiling point this summer as many large American companies have sought to buy smaller foreign rivals so they can renounce their United States corporate citizenship and reincorporate overseas to lower their tax bills. Others are considering the move, known as an inversion.
Again and again, we hear that these deals are being driven by an effort to make our companies more competitive globally and that unless we "reform" our tax system — which is code for "lower our corporate tax rate" — we will lose business to foreign rivals.
It is a compelling narrative. But it may be wrong.
Edward D. Kleinbard, a professor at the Gould School of Law at the University of Southern California and a former chief of staff to the Congressional Joint Committee on Taxation, makes a captivating argument in an academic paper that the United States tax code — counter to the conventional wisdom — is not impeding global competitiveness. In fact, the opposite is true.