Tax Analysts Blog

While Japanese Business Leads on Tax Reform, American Business Wimps Out

Posted on Jul 1, 2010

Yesterday there was another meeting of the President's deficit reduction panel. Murdoch's unabashedly biased Wall Street Journal took the opportunity to spin the non-event into a story of its liking ("Deficit Panel Stresses Spending Cuts") . At the meeting there was a lot of self-congratulatory but meaningless talk about progress. The most pathetic presentation came from America's Business Roundtable. In a press release the umbrella group representing America's biggest corporations gave the usual pablum about cutting spending and tax reform without any specific proposals.

This is a striking contrast with the approach taken by big business in Japan. For years it has advocated a substantial hike in Japan's value-added tax rate (currently at 5 percent) and a substantial cut in Japan's corporate tax rate (hovering at about 40 percent). The business federation's effort appear to be paying off. The ruling Democratic Party of Japan as well as the opposition Liberal Democrats both endorse a consumption tax hike and a corporate rate cut. Polls show that the public is receptive to consumption tax increase.

The United States needs to begin serious discussions about a VAT to reduce the deficit and a cut in the corporate rate to increase international competitiveness. But how can we even begin down this path if American business--which has the most to gain from such a change--does not provide some leadership?

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