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This Is How You Lower Corporate Taxes

Nov. 26 (Bloomberg) -- Senate Finance Committee Chairman Max Baucus offered some good ideas last week for improving how the U.S. taxes American multinational corporations. The current system could certainly stand some improvement. It’s so bad, Congress might actually do something.

Under the current rules, profits these companies earn overseas are subject to American taxes, but only once a company brings the money back to the U.S. Companies therefore try to move their operations, or at least shift their earnings, to countries with lower tax rates, then leave them there. At 35 percent, the headline U.S. corporate tax rate is high by international standards, so the incentive to keep earnings abroad is all the greater. The result is some $2 trillion in accumulated profits held abroad and corporate taxes that have fallen to less than 10 percent of federal tax revenue last year, down from 22 percent in 1965.