NCPA - National Center for Policy Analysis

UNITED STATES COMPARES FAVORABLY ON TAXES

June 14, 2004

A new report by the Joint Economic Committee concludes the U.S. tax climate for economic growth is at or near the top among the nine largest advanced economies. The other eight nations included in the study were Australia, Canada, France, Germany, Italy, Japan, Spain and the United Kingdom.

Specifically, the report found that the United States:

  • Has the lowest top rate of tax on personal income, at 35 percent.
  • Has the second lowest rates -- after Italy -- on dividends and long-term capital gains (both ranging from 5 to 15 percent).
  • Is the only country without a national sales or value-added tax, though most states imposes sales taxes.
  • Has the smallest government in terms of the ratio of total spending to gross domestic product (35.9 percent).

From a tax standpoint, the United States is now more attractive than it was several years ago as a destination for capital. Yet the country lags behind others on corporate taxation: The top federal rate of 35 percent is the highest among the large advanced economies, along with Spain, notes the report.

Contrary to widespread misunderstanding, having a high rate of corporate income tax does not benefit the average person at the expense of wealthy businessmen. Rather it adds to the overall burden of taxation that individuals -- such as shareholders, employees and consumers -- ultimately bear, while it discourages entrepreneurship and job creation.

Source: Jim Saxton, "How Competitive is the U.S. Tax System?" Joint Economic Committee, U.S. Congress, April 2004.

 

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