The Corner

Yes, the U.S. Corporate Tax Rate Is High

Tonight Speaker Boehner talked about how punitive the corporate income tax is. He is right. Here is a chart.

In 2011, national statutory corporate tax rates among the 34 members of the OECD will range from 8.5 percent in Switzerland to 35 percent in the United States. When sub-national taxes are added, the United States has the second-highest statutory combined corporate tax rate — 39.2 percent — after Japan’s rate of 39.5 percent.

As I said on this blog last week, corporations, like individuals, can and do use tax breaks to lower their tax burdens and, as a result, the effective tax rate is lower than the top rate. However, these breaks shouldn’t be looked at independent of the corporate tax system. The United States not only imposes high rates, but it also taxes corporations on a worldwide basis: profits made by an American-owned computer plant are subject to American taxes whether the plant is located in Texas or Ireland. In contrast, most major countries do not tax foreign business income. In fact, about half of OECD nations have “territorial” systems that tax firms only on their domestic income.

The combination of high rates, worldwide taxation, and a competitive global marketplace makes our corporate tax system extremely punishing. It should be abolished.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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