NCPA - National Center for Policy Analysis


April 26, 2007

The United States does poorly in international comparisons of corporate tax rates, says Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council.

Last year, the Australian Treasury issued a report titled "International Comparison of Australia Taxes."  When looking at 10 leading Organization for Economic Co-operation and Development (OECD) nations -- Australia, Canada, Ireland, Japan, Netherlands, New Zealand, Spain, Switzerland, the United Kingdom and the United States -- only Japan had a higher corporate tax rate than the United States.

An April 17 Wall Street Journal article ("Europe Competes for Investment With Lower Corporate Tax Rates") noted some additional facts that U.S. policymakers should be watching and responding to:

  • Consider that the combined U.S. federal and state (average) corporate tax rate is just over 39 percent. 
  • That compares unfavorably to average corporate tax rates of 36.5 percent among G-7 nations, 30 percent for Asia-Pacific countries, 28.5 percent in Latin America, 28.5 percent also among 30 OECD nations, and 25.8 percent in the European Union (EU).

The United States is supposed to be a leader in providing pro-growth tax relief.  It certainly should not be trailing behind much of the world, says Keating:

  • A good first step to promote investment and growth would be to reduce the corporate capital gains tax rate so that it equals the individual rate of 15 percent. 
  • The next step should be to at least get our corporate tax rate in line with the average for the EU, i.e., about 25 percent.

The United States is in an intense, worldwide competition for business and investment.  Reducing corporate income and capital gains tax rates is simply smart economics --making the United States a less costly place to invest, build, create jobs and make a profit.

Source: Raymond J. Keating, "Our Competitors Are Cutting Their Corporate Tax Rates," Small Business & Entrepreneurship Council," Entrepreneurial View #429, April 21, 2007.


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