Your current web browser is outdated. For best viewing experience, please consider upgrading to the latest version.

Donation - Other Level

Please use the quantity box to donate any amount you wish. Sign Up to Donate


Send a question or comment using the form below. This message may be routed through support staff.

Email Article

Password Reset Request


Add a topic or expert to your feed.


Follow Experts & Topics

Stay on top of our work by selecting topics and experts of interest.

On The Ground
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed

Manhattan Institute

Close Nav
Share this issue_brief on Close

The Merits of a Territorial Tax System

issue brief

The Merits of a Territorial Tax System

October 15, 2012

America’s corporate tax rate is one of the highest in the industrialized world. Currently, the U.S. corporate tax rate is 35 percent, compared with an average of 23 percent for its industrialized competitors. Reform is becoming increasingly urgent as the gap between American and foreign rates widens. Not only are U.S. corporations at a disadvantage when they operate abroad, but high tax rates are driving American companies overseas. For example, Aon Corporation, the Chicago-based insurance company, recently relocated its headquarters to London for tax reasons.

The last major revision of the tax code occurred in 1986, and some of those reforms have been undone by rate increases. America should lower the corporate tax rate and switch to a territorial tax system. This would increase economic growth and allow corporations to compete on an equal footing with competitors abroad. Contrary to what critics assert, lowering the corporate tax rate would not deplete the domestic tax base nor would it result in a loss of American jobs.

This report begins with a brief discussion of America’s current corporate tax system, and then analyzes the presidential candidates’ plans for reform. The taxation of foreign income is one of the most complex parts of the Internal Revenue Code, and this report does not pretend to go into all the details. Rather, it offers an overview of some of the major issues under discussion.