White Paper


Will Corporations Migrate To More Favorable Tax Jurisdictions?

By Charles Gradante

July 2007 – Henry Paulson recently announced that he supports reform of the U.S. Corporate Tax Structure. “Cutting corporate and capital gains taxes will increase spending and boost productivity.”  The Hennessee Group agrees with Paulson and believes that reforming our corporate tax structure is fundamental to keeping the American economy strong.

U.S. corporations are not only fighting foreign protectionism, the U.S. tax structure is also hindering their competitiveness.  Behind Japan, the U.S. has the highest corporate income tax in the industrialized world.  No wonder U.S. corporations are disadvantaged with Federal and State corporate taxes at 39% for U.S. corporations versus 25% for the European Union (not including other federal subsidies afforded European Corporations).  U.S. corporations have a 14% differential which reduces their ability for competitive pricing.  Right now, the weak dollar is offsetting much of this differential but we cannot run an economy on ever declining strength of the dollar.

Combine this with double taxation on corporate income and lengthy depreciation schedules and we have more drag on Corporate America.  Further, headwinds to U.S. competitiveness overseas is the double tax of international income of U.S. corporations.

Opposing tax reform are concerns about the budget deficit.  The U.S. Budget Deficit is misunderstood.  It is about half the historical level since the 1960’s and the deficit will likely come in below 2% of GDP in 2006.  This is a manageable number and well below the fear point at 5% of GDP.

The concern we have at the Hennessee Group is that corporations are seeing the global market as just that.  The option of migrating to another tax jurisdiction is now on the table in corporate board rooms.


About the Hennessee Group LLC
Hennessee Group LLC is a Registered Investment Adviser that consults direct investors in hedge funds on asset allocation, manager selection, and ongoing monitoring of hedge fund managers.  Hennessee Group LLC is not a tracker of hedge funds.  The Hennessee Hedge Fund Indices® are for the sole purpose of benchmarking individual hedge fund manager performance.  The Hennessee Group does not sell a hedge fund-of-funds product nor does it market individual hedge fund managers.    For additional Hennessee Group Press Releases, please visit the Hennessee Group’s website.  The Hennessee Group also publishes the Hennessee Hedge Fund Review monthly, which provides a comprehensive hedge fund performance review, statistics, and market analysis; all of which is value added to hedge fund managers and investors alike.



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