Western Europe has aggressively used 'tax competition' to lure new plants and equipment away from the U.S. according to a new study released by the Manufacturers Alliance/MAPI. Entitled "How the U.S. Corporate Income Tax, Foreign Border-Adjustable Value-Added Taxes and International Trade Rules Team up to Disadvantage U. S. Companies and Their Workers", the study concludes that the current trade imbalance with Western Europe is a direct result of these faulty tax policies.
Western Europe has doubled its exports to the rest of the world and enjoys a large trade surplus with the U.S. by reducing corporate income tax, rebating value-added taxes (VATs) on its exports and using the WTO's arbitrary rules to thwart effective responses by the U.S., according to the study.
"The results of this study should be a wake-up call for the President's Advisory Panel on Federal Tax Reform," said Thomas J. Duesterberg, CEO, the Manufacturers Alliance/MAPI. "Until we address this competitive imbalance due to the tax structures in the U.S. and its main competitors, we are likely to see a continued erosion in our balance of trade."
In addition to the effect on manufacturing companies, U.S. workers are feeling the effect of the tax policy through slower growth in wages and salaries. Garrett A. Vaughn, economist at the Manufacturers Alliance/MAPI and author of the analysis, concludes that "less new plant and equipment locating within U.S. borders, dampens demand for American workers." He explains, "the U.S. corporate income tax does more to fund Europe's welfare states than provide real tax fairness to American workers."