Business Tax Incentives Create Race to the Bottom

by Jeremy Scott, Editor taxanalysts® Tax Notes

Tax competition is a positive force in the global economy, according to Daniel Mitchell of the Cato Institute. He believes that governments competing against each other to attract business makes tax codes more efficient and helps economic growth.

It certainly helps businesses, but it isn't clear just how beneficial the race to bottom out marginal business tax rates actually is. Tax competition is at an all-time high, but the global and national economies aren't exactly booming.

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Ultimately, tax competition creates a prisoner's dilemma. If every U.S. state would agree to refrain from providing tax subsidies, it is likely that the nation as a whole would be better off. But a single state can reap enormous short-term benefits by cutting tax rates or offering rebates to attract corporate relocations...

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View insights of taxanalysts® Jeremy Scott in their entirety on TAX.com.

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