NCPA - National Center for Policy Analysis

U.S. Should Reform Corporate Tax Rates

February 15, 2011

Since the 1980s, other economies in the Organization for Economic Cooperation and Development (OECD) have been steadily lowering their corporate tax rates, but the United States has not cut its top statutory rate since 1993.  In the OECD, the United States also has higher-than-average effective average and effective marginal tax rates, which are the best indicators for capital investors of their true tax liability, say Kevin A. Hassett, senior fellow and the director of economic policy studies, and Aparna Mathur, resident scholar, at the American Enterprise Institute.

While there is broad consensus that the high statutory corporate tax rate in the United States makes investments here uncompetitive relative to those in other OECD economies, some question the extent to which effective taxes paid by corporations are equally high.

  • The United States is currently underperforming in global tax comparisons.
  • The effective average tax rate for all OECD countries excluding the United States is 20.6 percent, while the effective marginal tax rate is 17.3 percent.
  • The corresponding values for the United States are 29 percent and 23.6 percent.
  • Therefore, while much media attention has been focused on the statutory rates, policymakers should address the urgent need to reform effective rates as well.

Any effort at corporate tax reform is therefore incomplete without a push toward addressing not only the high statutory rates, but also the relatively high effective average and marginal rates. 

Source: Kevin A. Hassett and Aparna Mathur, "Report Card on Effective Corporate Tax Rates," American Enterprise Institute, February 2011.

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