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  • High Corporate Income Tax Rate Driving Jobs Overseas

    The United States has the second highest corporate tax rate of any of the 30 countries in the Organization for Economic Cooperation and Development (OECD) – a collection of the most economically developed countries in the world. The federal rate is 35 percent. Add on the average state corporate income tax and United States businesses pay a top rate over 39 percent. This is just below Japan which has a rate slightly over 39.5 percent.

    The average corporate income tax rate in the OECD is about 25 percent. The United States’ rate is almost 15 percentage points higher. Of the 30 countries in the OECD, 27 of them have cut their corporate income tax rates since 2000. By standing still, the United States has fallen behind.

    The top marginal tax rate is the tax rate a business will pay on new investment, so it is an important determinant for businesses when they make decisions about where to locate new facilities. The high U.S. corporate income tax rate is driving jobs overseas as businesses work to remain as competitive as possible in the global marketplace. It doesn’t help that the United States is the only country in the world that taxes its businesses on the income they earn in foreign countries. Every other country only taxes businesses on the income earned within their borders. A reduction of the corporate income tax rate down to at least the average 25 percent rate in the OECD is long overdue.

    Liberals have long argued that a rate cut is not necessary because the effective corporate income tax rate in the United States (calculated by dividing the amount businesses pay in taxes by their income) is comparable to the effective rate in other countries. They claim that all the credits, deductions and exemptions available to businesses drive the effective rate down and therefore the marginal rate is unimportant.

    This argument has just been shattered in new study by the Cato Institute.  The study found that while it is true that credits, deduction and exemptions lower the effective tax rate, it turns out the effective corporate tax rate in the United States is still considerably higher than international averages.  The effective corporate income tax rate in the United States is 35 percent. This is significantly higher than the average of the G-7 countries (29 percent), the average in the OECD (20 percent), and the average of 80 developed nations (18 percent).

    There is no way anyone can argue against cutting the rate. There is bipartisan acknowledgement in Congress that the corporate income tax rate must be lowered; Cato’s compelling new evidence  shows the need for Congress to act soon before more jobs are lost to foreign countries more welcoming to new investment.

    Additionally, a lower corporate income tax rate would also raise the United States’ standing in the Heritage Foundation’s Index of Economic Freedom. In 2010, The United States fell out of the group of “free” countries and for the first time is the land of the “mostly free”. A lower corporate income tax rate would go a long way to restoring the United States to its rightful standing among free nations.

    Posted in Economics [slideshow_deploy]

    14 Responses to High Corporate Income Tax Rate Driving Jobs Overseas

    1. Lloyd Scallan - New says:

      Who owns corporations and business? American with money, Right! Don't you see it yet? taking money from the "haves" and giving it to the "have-nots".

      Perhaps if we say "spreading the wealth". What about "wealth distribution".

      Any of this look farmiliar?

    2. Wildcat from Dallast says:

      One of the reasons we as a nation are losing economically in the world is this exorbitant corporate income tax at the federal level and then even that becomes worse at the state level.

      This is just one more reason why we need to rid the halls of power at the federal and state level from anyone with a Progressive/Statist/Socialist/Liberal and/or Democrat label attached to them. They need to be replaced by strong conservatives who are willing to actually make the tough choice to implement viable taxation that attracts business and industry while mutually enabling the economy to steadily grow and outperform the other economies in the world.

      In my assessment we need to lower the federal level of corporate income tax to 11%, mandate individual states can have of range of 0% to a max of 5% and, in order to incentivize businesses having and paying for health insurance premiums for all their employees, allow them to write off the cost of all such premium payments (an allowable deduction) before calculating their federal corporate tax bill. In order to get more in line with other countries similar tax laws why not exclude all corporate income that is taxed overseas, or if not taxed (unlikely), only tax it at 50% of the US based corporate income tax rate. Either way, that should more than make it profitable for more businesses to have operations here which provides more jobs with benefits for Americans and still provides more tax revenues once the global economic powers start relocating to the United States. In the long run our economy will surge and grow like it should rather than sputter and choke due to our “Socialist-In-Chief’s” (SIC) war on prosperity. Of course we need to repeal “Obummer Care” to deflect an unnecessary addition to the federal debt crisis.

    3. John, Rhode Island says:

      but think of the children!! if Congress cannot steal from corporations (who simply pass that cost along to consumers in the form of higher prices and fewer jobs), who will they steal from to fund their ridiculous welfare programs?

    4. Pingback: B2 Journal | High Corporate Income Tax Rate Driving Jobs Overseas

    5. bigdave ocala fl says:

      Makes perfect sense huh? Politicians, 90% of whom NEVER HELD A PRIVATE SECTOR JOB, are the REGULATORS of American Corporations, their businesses completely unknown to the incompetents in Washington, DC and these Corporations are told how to act and how much taxes to pay. Remember the dress defiler himself lambasteing BIG OIL, BIG COMPUTER, BIG PHARMACEUTICAL, and what do the ones being attacked do? Shiver and JOIN the SOCIALISTS out of fear rather than standing up to those jerks(Maxine Waters to Oil Co Execs…"we're going to socialize you…"!!!!!). If this was thirty years ago, the press and the media would have banded together and run that idiot Waters out of town! But its NOW and the SOCIALISTS HAVE WON…until it all falls down and back to the OLD WEST WE GO. GET READY.

    6. Billie says:

      When business are invaded by unnecessary government mandates, regulations, tax increases, basically government control, I'd run too. Another obama made crisis. Another step toward government dependency.

    7. Billie says:

      Another take over of freedom…

    8. Pingback: Why Obamanomics Has Failed – Annotated | Cycaster News

    9. Patrick says:

      This presumes that the Cato numbers/methodology is correct.

      The CBO's number contradict these findings, and I'll take the CBO over Cato any day. One is impartial while the other has a clear anti-tax agenda.

    10. Marion, NC says:

      When will our government ever learn; the higher income tax rates are and the more income tax business and individuals have to pay, the less money there is to have an economy. Big government and a strong economy is like oil and water. http://www.myowntax.com

    11. Kevin Schmidt says:

      This article is just an illogical straw man fallacy, since it fails to mention the FACT that virtually no corporation and no individual actually pay the statutory tax rate. After all the loop holes are taken advantage of through creative accounting, the corporate tax rate actually paid is one of the LOWEST in the OECD.

      The World Bank-International Finance Corp. estimated that the United States has a lower effective rate of current corporate tax than that of several other nations, including Germany, Canada, India, China, Brazil, Japan, and Italy.

      So it is not taxes which are causing our manufacturing companies to shut down and move over seas. It is in fact, free trade treaties that are driving our manufacturing businesses off shore. These treaties make it impossible for U.S. based companies to compete with foreign manufactures who treat their employees like slave labor, offer no disability or pension benefits, force employees to work in unsafe conditions and pollute the environment without paying to clean it up. Fair trade treaties are needed to fix the situation.

      To add insult to injury, the IRS also provides multinational corporations additional generous tax loop holes for stealing our jobs and shipping them off to China, India and the rest of the third world.

    12. Pingback: corporate taxes....be they really so high? - U.S. Politics Online: A Political Discussion Forum

    13. Guest says:

      BTW, the combined corporate tax rate varied between 49.8-44.2% in 1986-1987, and 44.2-38.6% in1987-1988. All under Pres. Reagan (who served 1981-1989!)
      Quit acting like Democrats are behind corporate taxes.

    14. IanMoone says:

      Yeah the typical republican stance is to focus on the tax rates while completely ignoring reality

      What did GE pay last year? How about Google? http://www.bloomberg.com/news/2010-10-21/google-2

      Should anyone be surprised at the half truths posted here? Just like Faux News, providing only what you need to incite hated. http://www.cbo.gov/ftpdocs/69xx/doc6902/11-28-Cor

      Along with that other propaganda, companies create jobs. What nonsense, DEMAND creates jobs. See any demand? No. Why? Simple: http://www.epi.org/economic_snapshots/entry/corpo

      And we're suppose to pity these newly ordained by the US Supreme Court Citizens.

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