RESEARCH PAPER - CORPORATE TAX REFORM Assignment

RESEARCH PAPER - CORPORATE TAX REFORM - Assignment Example Corporate tax revenue share that included total federal tax revenues collapsed (Maples & Graveled, 2011)3. Consequently, federal revenues declined from 28% in 1950’s to less than 10 percent since the 1980’s. A big percentage of corporate profits that contribute a big percentage of federal revenue have also followed the same trend of decline. In 1950’s, corporation groups paid not less than 49 percent to federal income tax. However, the percentage dropped significantly to only 25.3 percent from 1990’s. In addition, despite the boom years of the 1990’s, share of the US economy remained sharply lower representing only two-fifths of GDP share in the 1950’s hence a drop in the federal revenue. Finally, since corporations in America bear the lowest income tax revenue compared to other European countries, United States bore the heavier burden to cater for the deficit in income tax. As a result, federal revenue decreases. Lowering tax rates implies a significant increase in the corporate income. Apart from income increase, tax inversion makes it safer to venture into business opportunities that organizations regarded as too risky to take. In the recent past, for instance, Endo Pharmaceutical made a bid to purchase Auxilium, a close competitor (Sullivan, 2011)4. Lower tax rates covering mergers and acquisitions influenced Endo Pharmaceuticals to proceed into a risky bid. In addition, if shareholders of a foreign company own only up to 80 percent of its shares, a US corporation enjoys payment of lower tax on subsequent earnings. Such corporations also evade paying taxes to the US on any cash they store outside the country. Consequently, companies easily enter into the market, increase market share, expand the list of therapeutic specialists, and use a single opportunity to reduce their tax rate. Furthermore, with tax reversion, corporations use transfer