Corporate tax rate wields great influence

Taxes have an impact across every aspect of the economy, and the tax policies of other countries also affect our own. The tax mix of other nations also influences decisions by American corporations and investors.

Meanwhile, America’s corporate tax rate of nearly 40 percent gets a lot of attention and wields a lot of influence – even though one expert said it is not a big part of the nation’s tax take.

Those were some of the key takeaways recently at Lehigh University’s 57th annual tax forum in Iacocca Hall at the Mountaintop Campus in Bethlehem. About 140 people, including chief financial officers, attended the event.

Experts from various backgrounds gathered for the day-long event to explore social, economic and geopolitical pressures on tax systems, discuss the challenges of America’s tax policy and gain insights about managing risks and transparency in global tax planning, among other topics.

“We have a high marginal tax rate, which is a change in the tax as a percentage of the change in income,” said Bryan Cloyd, Certified Public Accountant and professor of accounting and department chairman at Lehigh. “The marginal tax rate for high net worth individuals is pushing 50 percent. It’s an example of how high rates distort behavior.”

Such a rate can affect investment decisions, and talk of tax reform is prevalent throughout the country.

“I can assure you that whatever is passed in the tax code will be considered tax reform,” said Tom Neubig, former deputy head, Tax Policy and Statistics Division for the Centre of Tax Policy and Administration for the Organization for Economic Cooperation and Development, headquartered in Paris.

Neubig gave a presentation on pressures faced by tax systems. While tax systems are designed to promote economic growth, be economically efficient and minimize compliance and administrative costs, often there are trade-offs between these goals, Neubig said.

“If you want to have a simpler system, you are likely to have some distortions,” he said, citing impacts on taxpayers, households and investor behavior.

Any tax system is going to have some distortions, but minimize them as much as possible, Neubig said.