One Way to Get Companies Hiring Again – Slash Corporate Tax Rates

March 8, 2010

The jobs picture in the U.S. remains weak.  Unemployment numbers announced Friday held steady at near 10% while the rate including discouraged workers rose slightly to 16.8%. What is to be done? 

One idea, discussed recently by my colleague Kevin Hassett is to cut the corporate income tax rate to get firms hiring again.   In fact, there are good reasons to cut the rate regardless of the severity of the current economic crisis. 

Look at the following chart:

The numbers are dramatic. The trend among developed countries over the last 30 years has been to lower corporate income tax rates.  These reductions make firms more competitive. The outlier has been the United States, which has seen its corporate tax rate remain steady for almost two decades. Policymakers should be thinking of lowering the rate to the OECD average of around 25% -- or even lower to make the US even more competitive.