If tax rates can in fact be said to influence where companies locate and invest, the U.S. has a problem. As our economy becomes increasingly global our combined (federal and provincial/state) income tax rate is higher than every other country in the world, except Japan. Both presidential candidates have recognized the need to do something. Sen. John McCain proposes a significant reduction of the current 35% federal rate to 25%. Although coupled with other proposals and not nearly as definite or assertive, Sen. Barack Obama also indicated he is open to lowering the rates.

The U.S. can’t afford to ignore what most other industrialized countries have already figured out: the corporate income tax rates affect investment. This year China dropped its rate from 33% to 25%; and Taiwan, Hong Kong and Korea, which already had much lower rates than the U.S., dropped theirs even more. And it is not just in Asia. The adjustments swept Europe with Germany, Italy, the U.K. and Spain all making rate reductions. It is truly a global thing. Other countries that are part of the wave of cuts: Turkey, Bulgaria, Israel, South Africa and Colombia.

So with so much talk of change in other contexts, it is important to point out that it is also time for a change to our corporate tax rate. A full listing of the corporate rates in nations belonging to the Organization for Economic Cooperation and Development, along with other revealing information on this subject is available from the Tax Foundation.

Passed in the midst of what was perceived by many (but not all) as a crisis, the primary objective of HEA 1001-2008 was to reduce property taxes for homeowners. In this regard, it is bound to be largely successful by combining additional sales tax revenue (over $900 million) with reducing property tax levies, allowing individuals to deduct 35% of their homeowner assessment and, beginning in 2010, capping residential assessments at 1% of their gross assessed value.

These actions may not be enough to satisfy everyone, but in a state in which the homeowners’ burden was ranked as the 33rd lowest nationally (and now will drop into the bottom 10), they should be seen as more than adequate for most. Still, we can’t immediately measure its success. Like most major endeavors of this type, many questions will not be immediately answerable. They include:

* How successful will the multitude of other changes to the tax structure be at accomplishing their intended objectives?

* Will counties adopt local income taxes to serve as property tax replacements, as is the intent of the drafters?

* Will the referenda requirements dramatically affect capital projects? 

* How accurate were projections of taxpayer savings and the impact of the circuit breakers?

* How will the reforms affect business decisions?

* How will the legislation and post-enactment developments bear on the fall elections?

Diligent as they may be, the magnitude of these changes prevents surefire predictions of the outcomes. To review the Chamber’s positions on these matters, click here.