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Morning Brief: U.S. Firms Move Offshore to Avoid Taxes

by Steven J. Markovich
August 29, 2012

The interior of the Eaton Center in Cleveland (Nara J/Flickr). The interior of the Eaton Center in Cleveland (Nara J/Flickr).

The opportunity to save on taxes continues to attract firms to re-incorporate overseas (WSJ). The IRS recently tightened rules regarding relocation, but an exception for mergers will allow Eaton, a Cleveland-based manufacturer, to move its legal home to a law office in Dublin to save $160 million annually. Eaton’s CEO has argued for corporate tax reform: “We have too high a domestic rate and we have a thoroughly uncompetitive international tax regime.  Let’s not wait for the next presidential election [to change the rules].”

With the highest statutory corporate tax rate in the world—35 percent for federal taxes only—the United States is at a competitive disadvantage. This CFR Backgrounder by Jonathan Masters discusses the effect of current policy, and proposals for U.S. Corporate Tax Reform.

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.

Education and Human Capital

Creating an Education System for this Century

While America’s greatest innovation may be a publicly-funded mandatory education system that prepared workers well for the industrial revolution, today that model is struggling to meet the needs of workers and firms alike (HBR).  Tammy Erickson argues for reforms in how and what schools teach children, from adopting texting to grounding instruction in applicable skills.

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

Innovation

Taking on First to File

Mark Stadnyk, the inventor of a motorcycle windshield, is challenging the constitutionality of the America Invents Act that will shift the United States to a “first-to-file” patent system (NYT).  The change, scheduled for March, is intended to simplify the current patent process by removing the opportunity for drawn out litigation between rival claimants. Stadnyk believes the change will favor large companies, who have the resources to pay lawyers to quickly write and file patent applications.

Should the United States adopt a “patent box” tax incentive as several European countries have done in recent years in order to spur innovation? This Policy Initiative Spotlight by Jonathan Masters examines the issue alongside a more conventional policy, the research, and development tax credit.

Digital Tools for Office Leasing

Startups are challenging the dominance of brokerage firms and the leading commercial-property-data company for office leasing information (WSJ). New websites give landlords a venue to advertise their properties, while other sites share detailed information on leases, including rents and how much landlords put toward improvements. “It’s like trying to book a plane ticket in 1997,” said one entrepreneur who sees the industry as technologically backward and ripe for change.

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

Infrastructure

A Chicago Truss Bridge Rolls Into Place

Chicago recently installed a 400-foot, 4.3 million pound railroad truss bridge by building it nearby and rolling it into place (Transportation Nation). It is believed that this is the largest truss bridge ever moved into place, and it is part of a large grade separation project to eliminate railroad and roadway crossings and improve traffic flow.

Chicago’s $9 billion infrastructure plan was the subject of a Policy Initiative Spotlight by Steven J. Markovich. As part of that plan, Mayor Rahm Emmanuel has championed an infrastructure bank.

Infrastructure. Read more on how upgrading the nation’s aging network of roads, bridges, airports, railways, and water systems is essential to maintaining U.S. competitiveness.

The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.

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