NCPA - National Center for Policy Analysis

The Facts about the Corporate Income Tax

May 12, 2011

There are many myths about the U.S. corporate income tax, says Veronique de Rugy, a contributing editor at Reason Magazine.        

  • Myth 1: We can collect more revenue by raising the tax rate on corporations or by increasing the top bracket.        
  • Fact 1: The wealth of the economy is a much better indicator of corporate tax revenue than tax rates and tax brackets.        
  • Myth 2: Corporations pay the corporate income tax.        
  • Fact 2: First, corporations do not pay taxes, only individuals pay taxes.  More importantly, economists have shown that a majority of the corporate income tax is borne by labor mainly in the form of lower wages rather than borne by shareholders.        
  • Myth 3: The United States is a friendly country for businesses.        
  • Fact 3: While there is good access to capital, the United States has the top corporate income tax rate among Organization for Economic Cooperation and Development (OECD) nations and a worldwide tax system.

Consider, in 2010, the top national corporate tax rates among the 31 members of the OECD ranged from 8.5 percent in Switzerland to 35 percent in the United States.  Hence, within the OECD countries, the United States has the highest statutory tax rate at the national level.

Interestingly, the U.S. corporate income tax raises little revenue compared with other taxes and this share has decreased over the years.  It's not surprising, then, that the United States raises less revenue from the corporate tax than the OECD average.  Corporations, like individuals, can and do use tax breaks to lower their tax burdens, says de Rugy.

Source: Veronique de Rugy, "The Facts about the Corporate Income Tax," Reason Magazine, May 6, 2011.

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