US President Joe Biden and senior officials like Treasury Secretary Janet Yellen are making it clear they want US corporations to pay higher taxes. The logic behind taxing American companies 28% instead of 21% is “the mother of all really bad ideas,” according to Kevin O’Leary.
O’Leary: Tax cuts work
Former US President Donald Trump lowered the US corporate tax rate to 21% in 2018 and this translated to improving unemployment rates, O’Leary, Chairman of O’Shares ETF and “Shark Tank” personality, said on CNBC’s “Squawk Box.” The unemployment rate dropped as low as 4% as businesses of all shapes and sizes took advantage of the strongest economic environment that has been seen since the 1950s.
Are you looking for fast-news, hot-tips and market analysis?
Sign-up for the Invezz newsletter, today.
Entertaining the concept of raising US corporate tax rates to 28% would imply American companies lose all momentum as they would become the most taxed in the world, O’Leary said.
Meanwhile, US companies are scrambling to move out of states like New York with high tax rates towards those with lower tax rates like Florida. The COVID-19 pandemic and shifts in working practices makes it clear that companies can easily move to jurisdictions that save them money.
The same logic holds true for corporate headquarters. A company no longer has to be physically located in the United States to be globally competitive. Nike Inc (NYSE: NKE), as an example, offers its products direct to consumers across the world so there is no reason for it to be headquartered near Beaverton, Oregon.
“I chose to operate in places where the corporate tax rates are lower, and so does the rest of money that flows to the path of least resistance,” O’Leary said. “We would destroy this economy while it still has 9 million unemployed people.”
visit & create account
Eliminate the corporate tax rate
In conjunction with talks over a corporate tax hike, the Biden administration is pitching the idea of a nearly $2 trillion infrastructure and stimulus program. But in reality, what the administration will be doing is “flushing money out of a helicopter” only to take it back in the form of higher taxes.
“How dumb is that idea,” O’Leary said. “We’ve got to let this money percolate through the economy and get these people employed again and never, ever think again of raising corporate tax rates.”
O’Leary said he is in favor of completely eliminating the corporate tax rate. Instead, the government can tax usage and people to become “really competitive” on the global stage.