As some leaders in Washington demonize companies like Raleigh-based Salix Pharmaceuticals for investigating so-called corporate “inversions,” they ignore the true culprit: our job-killing, anti-competitive tax code. Because of our too-high corporate taxes, North Carolina and U.S. companies are fighting an uphill battle in global markets, and it’s driving some companies to relocate to more business-friendly locales. It’s also driving some of them out of business.
It’s time for a bipartisan solution to this problem, one that works for everyone: the companies involved, workers, families and our governments and communities.
Currently, U.S. companies – including those in otherwise business-friendly states like North Carolina – pay the highest combined corporate tax rate in the industrialized world at 39.1 percent. That’s right – our corporate taxes are higher than even places like France, Italy and Sweden. In fact, among Organization for Economic Co-operation and Development (OECD) nations, the average is 25 percent.
Translated to day-to-day business, this means that North Carolina companies enter any global market with a massive pricing disadvantage – one that is increasingly difficult to overcome. This situation is having a massively negative effect on our economy. Every year, our nation is $300 billion poorer (in terms of Gross Domestic Product) because our corporate taxes are ruinously high. According to Ernst & Young, North Carolina’s share of this negative pie is about $11 billion a year, or about a $635 annual loss for a North Carolinian household earning roughly $50,000.
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We’ve heard a lot about “inversions” lately, but companies didn’t just start doing this out of the blue – their hands are being forced by our tax system. Salix is just one example of a North Carolina company looking for ways to relocate in order to stay viable as a business. For smaller businesses that don’t have the ability to relocate, the only option is sometimes to close their doors altogether.
The business community is of course extremely frustrated by this situation. But the voting public is becoming more so as well. In a recent poll by the Reforming America’s Taxes Equitably Coalition, a broad, bipartisan majority of 60 percent were found to support corporate tax reform. The report states there is “broad bipartisan support for lowering the corporate tax rate in the United States from 35 percent to 25 percent and eliminating corporate loopholes to pay for it.”
Congress has begun to take notice as well, with a serious, ongoing discussion about comprehensive tax reform and much talk of corporate tax rates in light of so many companies relocating overseas. For the sake of North Carolina businesses, workers, families and communities, it is vital that this discussion move forward and produce real results as soon as possible.
If we truly want to return to real economic strength and prosperity – not anemic growth and a remaining fragile economy – it is absolutely necessary to undertake corporate tax reform. Here in North Carolina, we’re proud to have lead the way with the state legislature passing a bipartisan tax reform package that is having a real, positive impact on both our current economic situation and our future prospects as a state.
Our leaders in Washington must do the same, and there is no time to waste. President Obama and Congress should stop their bickering over ancillary issues and focus on what will actually help small businesses and the middle class: real, significant corporate tax reform.
Dal Snipes is the former mayor of Dunn and the former chairman of the Independent Insurance Agents of North Carolina. Tom Fetzer is the former mayor of Raleigh and a former chairman of the NCGOP.