NCPA - National Center for Policy Analysis

U.S. Corporate Tax Rate Set to Take over Number One Spot

March 17, 2011

The U.S. corporate tax rate will soon become the highest in the industrialized world, and is already in its 20th year of being above the average for similar economies, according to a new analysis by the Tax Foundation.   As other nations enact reforms and rate cuts, the U.S. corporate rate will continue to stand out as a hindrance to economic growth and competitiveness unless lawmakers move to lower the tax burden for businesses.

  • The combined federal and state rate of 39.2 percent of corporate profits is exceeded only by Japan, whose rate stands at 39.5 percent.
  • When Japan enacts planned cuts next month, however, the United States will have the highest rate of all of the economies in the Organization for Economic Cooperation and Development (OECD), the group of 34 advanced countries with economies most comparable to the United States.

While many lower-tax nations have achieved their enviable business environments by lowering their rates in recent years, the United States is poised to achieve the dubious honor of being the highest-taxed through a lack of action.  Between 2000 and 2010, nine countries cut their corporate tax rates by double-digit figures: Germany, Canada, Greece, Turkey, Poland, the Slovak Republic, Iceland and Ireland.  All nine fell considerably in the OECD rankings of high-tax countries.

For the United States to move to the OECD average and match China (which significantly lowered its rate in 2008) lawmakers will have to reduce the federal rate to 20 percent.  By all accounts, such a rate reduction could not be achieved within the revenue-neutral restrictions of broadening the corporate tax base alone.  The scope of corporate tax reform so far endorsed by the White House, for example, would fall far short of this goal, says the Tax Foundation.

Source: "U.S. Corporate Tax Rate Soon to Be #1," Tax Foundation, March 11, 2011.

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