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Aff—UQ—Taxes

US business climate massively unfriendly—corporate taxes are an alt cause

But that doesn't mean America excels at everything. In fact, despite being an economic superpower, there's one category where it ranks dead last. America, the not-so-great If you've been keeping up with the majority of business wheeling and dealing since the spring, you've probably caught a hint of the prevailing theme: corporate tax inversion. This is the practice whereby a U.S.-based company and its correspondingly high peak corporate marginal tax rate purchases a company in a foreign nation with a lower peak corporate marginal tax rate, anthen uses that purchase to relocate its headquarters to the foreign nation to pay less in taxes and thus keep more of its profits. When it comes to taxing corporations, the home of the brave and land of the free is practically the king of t he hill, in a bad way. The United States is only saved from the ignominy of being the highest-taxing country in the world by the United Arab Emirates, with its 55% tax on corporate profits. Within the U.S., before deductions, corporations could wind up paying as much as 40% in taxes on their profits. By comparison, according to research firm KPMG, the global average is just 23.57% (and again, this is before deductions). Why does this matter? Simply put, lower corporate taxes can entice investment money, new businesses, and innovation. This isn't to say that U.S. businesses aren't already doing a great job of developing new technologies, products, and medicines organically, but the U.S. also needs a steady source of foreign investment and collaboration in order to thrive. High corporate tax rates discourage foreign investment in the United States. In addition, if too many big businesses start latching on to the idea of relocating their headquarters outside the U.S. via overseas purchases, then the U.S. Treasury could begin facing tax revenue collection shortfalls. U.S. News in May noted that the U.S. Treasury could see $2 billion in lost tax revenue annually from instances of corporate tax inversion throughout the remainder of the decade. Had Pfizer (NYSE: PFE ) been able to successfully purchase AstraZeneca (NYSE: AZN ) , the tax savings alone probably would have eclipsed $1 billion per year and greatly increased this annual U.S. "tax-fleeing" estimate. Is America stymieing foreign investment? Yet it isn't just that the U.S. has the highest corporate tax rates of any major economic power -- it's that its top-end rates are static while a number of other leading nations have dropped their corporate marginal tax rate to appeal to foreign investors and to encourage economic growth. Have a look at how the U.S. stacks up next to a few other global giants:

Aff—UQ—Relocation

Empirics prove—unfavorable tax climate is causing relocation in the squo

Portman 6/24 (ROB PORTMAN, Ohio Senator, former United States Trade Representative “With Businesses Fleeing America, Congress Must Act”, Wall Street Journal, 6/24/14, http://online.wsj.com/articles/rob-portman-with-businesses-fleeing-america-congress-must-act-1403651765)

That is in large part why more than 20 major American companies have reincorporated elsewhere in the past two years. In 2012, for example, Eaton, a manufacturing company from my home state of Ohio, merged with Cooper Industries, a much smaller Irish company. The new company established its headquarters in Dublin, substantially reducing its tax liability in the process. Businesses are willing to pay to put a few miles between them and the IRS: U.S. companies in 2013 paid upward of 55% more than their target's market price for deals that allowed them to move overseas, according to a May report in this newspaper. Domestic mergers, on the other hand, usually only yield a 20% premium.¶ The U.S. tax system is also making American businesses more vulnerable to foreign takeovers. The American beer company Anheuser-Busch, for example, was absorbed in 2008 by Belgian-Brazilian firm, In-Bev. Other brewers have followed suit, driven by tax savings. The largest U.S.-based beer company in 2013 was DG Yuengling & Son, which has a U.S. market share of about 1.5%. Sam Adams is the second-largest, with a market share of 1.3%. The sad reality is that foreign purchasers, which can relocate their targets' headquarters overseas, have a huge advantage over U.S. purchasers. Thanks to our tax code, American firms are both less able to fend off foreign purchasers and less able to grow and become more competitive through acquisitions.¶ Meanwhile, the tax code limits job creation because it encourages U.S. firms to keep foreign earnings outside the U.S. and away from the U.S. tax collector. About $2 trillion that could be used to expand jobs and opportunities in the U.S. now sits overseas, according to Bloomberg estimates. American workers, who according to a 2006 Congressional Budget Office report bear nearly 74% of the corporate tax burden, end up with lower wages and reduced benefits.

Aff—UQ—Regulations

Regulations are nonunique—businesses are fleeing the US fast—prefer our qualified studies

Meekcoms 7/2 (Jan Meekcoms, Oregon state director for the National Federation of Independent Business Oregon Business Report, 7/2/14, http://oregonbusinessreport.com/2014/07/why-more-businesses-are-closing-than-opening/)

The Brookings Institution released a study, Declining Business Dynamism in the United States, that should alarm us all, and get elected officials debating the course of corrective action. Did you hear about it?¶ “I am fearful that this critically important study is not being noticed because it’s not about Wall Street,” wrote U.S. News contributor Jean Card, one of the few to report on the Brookings’ study. “The political class only really cares that the Dow hit a record high last week.”¶ The political class in Salem and in Washington, D.C. had better start caring in a big way. Highlights from the research done by economists Ian Hathaway and Robert Litan include:¶ • “… business deaths now exceed business births for the first time in the thirty-plus-year history of our data.”¶ • “Firms and individuals appear to be more risk averse … businesses are hanging on to cash, fewer people are launching firms, and workers are less likely to switch jobs or move.”¶ • “…the decline in dynamism hasn’t been isolated to particular industrial sectors and firm sizes … the decline in dynamism has been nearly universal geographically the last three decades— reaching all fifty states and all but a few metropolitan areas.”¶ According to Merriam-Webster, an entrepreneur is “one who organizes, manages and assumes the risks of a business or enterprise.” They are the risk-takers and playmakers of our economy.¶ As a small-business lobbyist, it will forever be my job to remind legislators of two very important facts: Small businesses employ more working Americans than big businesses do, and they are not just smaller versions of bigger companies—they have different difficulties in remaining solvent. Tend to those, and you’ll have a business dynamism that creates jobs.¶ The issues are no mystery. Taxes and regulations – the same ones big businesses must abide by – fall harder on small businesses, which have fewer resources to absorb them and no high-priced CPAs at all to handle them.¶ “Small businesses significantly impact Oregon’s economy,” reports the U.S. Small Business Administration’s Office of Advocacy. “They represent 97.6 percent of all employers and employ 55.5 percent of the private-sector labor force. Small businesses are crucial to the fiscal condition of the state and numbered 344,722 in 2010. Most of Oregon’s small businesses are very small … most employers have fewer than 20 employees.”¶ Although huge in number, small businesses are less likely to have influence, I believe, solely because most legislators do not understand them. They are not Nike, but explaining that – and having them comprehend it – has been hit and miss.¶ All businesses must carry workers’ compensation insurance, pay unemployment insurance taxes, and comply with local, state and federal regulations, but as Professor W. Mark Crain of Lafayette College in Pennsylvania notes, “… small businesses face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms.”

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