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  • U.S. to have Highest Corporate Tax Rate in the World

    Most of the time being number one is good. But when it comes to having the highest tax rate in the world, it is much better for a country to be bringing up the rear.

    Currently Japan holds the inauspicious distinction of having the highest corporate income tax rate in the world (39.5 percent). The United States is a close second, only a few tenths-of-percentage points behind.

    Japan will soon fall from the top spot because it has finally recognized what the rest of the industrialized world realized over a decade ago: A low corporate income tax rate is vital for economic growth in the global marketplace. As such, Japan just announced it will reduce its corporate income tax rate by 5 percentage points down to around 35 percent. This remains far above the 25 percent average rate of other industrialized countries, but for them it is a start.

    Japan’s reduction will leave the U.S. in the uncomfortable position of having the highest corporate income tax rate in the industrialized world. Hopefully Congress will finally see fit to lower the rate now that we will hold that disreputable title.

    The U.S. ended up at the top because it stood still while the rest of the world was cutting its rates. As the chart below shows, in 1990 the U.S. corporate tax rate was middle of the pack. In fact, it was lower than the global average. The years since have seen every other industrialized country aggressively lower its rate.

    The top marginal corporate income tax rate is an important factor influencing economic growth and job creation, because it determines how much the tax will reduce the return the business earns from new investment. As a result, it is a large determinant when businesses decide where to locate their next venture—and where they will hire new employees.

    The high rate in the U.S. is driving businesses and jobs to other countries. Those jobs will continue to flow to other countries if the U.S. insists on levying its self-defeating corporate income tax rate. It is long past time for Congress to lower the rate so it is equal or below the 25 percent average of our competitors. If it does not, businesses and jobs will continue their exodus to more friendly locales.

    Posted in Economics [slideshow_deploy]

    42 Responses to U.S. to have Highest Corporate Tax Rate in the World

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    6. George Colgrove, VA says:

      Here is a bold idea:

      Lets ban all taxes on small businesses and corporations. Only tax personal income at a flat rate. Then see how the economy will boom. I am getting tired of the District of Columbia saying they are the smartest people alive, yet they cannot recognize that it is business that makes jobs. The healthier and more free the business climate is, the more jobs there will be. But the greedy nature of the federal government, where each program is on a insidious grab for peoples hard earned income – as if it were their personal slush fund – is making it difficult to do business in the corrupted United States. Simply put there is more money to be made elsewhere where other nations have made it easy to conduct business.

      A federal office who have frivolous, useless and pointless projects to increase moral or whatever of the federal workforce needs millions of dollars. In their little minds, they see a greater benefit to that useless program over a business who may need that money to hire several people or people who are wondering where their next meal is coming from. Congress and the federal workforce have forgotten whom they work for. They are where the greed in this country is and they are killing the future of America. Everyone in the entire federal government are anti-American and are as far from being public servants and patriots that any single person can be. Except for Christian Adams (former DOJ attorney) I am not hearing a peep out of the 2.7 million self-described patriots in the federal workforce on the internal abuses they are practicing against the American population. Sure, we do get droves of antidotal stories of massive waste in each of their offices, but none will come out and make a movement of it for fear it might end their jobs.

      There is a war waged by congress and the federal workforce against the people they are supposed to serve. To continue the crimes to society as being done in DC right now – knowing that this country is plunging into an unpayable debt is an obama-nation. They need to be stop.

      The continuing resolution of $1.3 trillion to keep the government running until Sept 2011 is an admission that it cost Americans $480,000 to employ each of the 2.7 million federal employees for only nine months!! Accrued over a year that is $640,000 – nearly 2/3 of a million dollars to keep a single federal employee busy. As a jobs program this is horrible.

      It is no wonder the average household income for the DC area has gone up 32% over the last 9 years, while the average American household income dropped 5%. The government took advantage of a crisis and we are being forced to pay through he nose for it. Obama is having his income redistribution! Only he feels it is DC and the federal government that are the rightful owners of our money. This has got to stop.

      • Tim Daly says:

        Like lambs to the slaughter, so go the days of people who will buy any line the neocons offer. Did you know that the top tax rate under Harry Truman was 92%, and under Eisenhower 91%. And guess what – the US got out of debt from WWII and Korea, and the country AND corporations BOOOOOMED economically like no other era in our history. The official top rate today is 35%. In fact, among the corporations that pay NO taxes (e.g., GE, which is this nation's largest war profiteering and domestic contractor, and those corporations that have mailbox offices in the Cayman Islands and elsewere, the few that do pay taxes pay an effective rate of 16% because of tax loopholes and tax credits. The corporate prostitues in Congress, as well as people like Grover Norquist and the rest of the traitors in this country, have brought us (and bought their way) to the brink of economic ruin. Before you all bail out to Dubai, along with war criminal dick cheney, you might just have to face a second American revolution, where copious scaffolds will await you.

    7. R Holland, Chandler, says:

      I say lets have a flat tax on people and business. 10-15% with a standard deduction of $10K per person up to $40K per family. 10-15% on business profit after actual expenses.

    8. Larry White says:

      Corporations Do Not Pay Taxes; Customers / Consumers Pay Taxes

      Corporations collect taxes….that's it. Moreover Consumers pay the cost of that "collection" and the cost of the IRS (more than $300 Billion / year- awlfully close to our Nation's Military Budget).

      What kind of uninformed (ignorant ?) politician can't understand that?

      I now live in Florida with very small corporate tax, no income tax, no inheritance tax, no capital gain tax; beginning to sound good? We can vote with our feet.

      However, there is a better way:

      1.Repeal the 16th Amendment to the U.S Constitution

      2.Pass HR25,S296 FairTax / Consumption tax.

      3.Close the IRS

      4. Turn the Tax Lawyer's and CPA's intellect and energy loose helping American Free Enterprise.

      .Then…Sit back and watch America grow again. It really can happen.

      Almost a Century Ago, the Progressives did it to us/ Ameirca;…why would we not believe we, Conservative Americans, can't do as well?

    9. Dennis Georgia says:

      Enact the FAIR TAX, do away with all the other taxes, and watch this country jump by leaps and bounds. This is common since, so it will not happen. Now as things stand noone knows how much taxes they pay, only what they get back. The dems lkie to say the FAIR TAX is 23% added tax, not that it replaces all the other brackets. The FAIR TAX takes controll from the "guvment" and puts it in our hands. This will also make the illegals pay their shre, spend it pay the tax.

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    11. Leon Lundquist, Dura says:

      Curtis, this is a wonderful factoid, thanks. I do wish the facts were well known how the Corporate Income Tax is actually paid by the Consumers (including the poorest citizens) and all Income Tax is funny money because it hasn't been allowed to complete its definition "the producer gets paid." They take the tax away before it is actually money, and it isn't real money until fully spent. The horrible Macro Economic fact is our Government is working against Americans, destroying their Capital and magnifying waste. If you don't buy their Junk Science Economic Theory, then it is plenty clear the Government wants to send all our jobs overseas!

      No, it isn't "Oops!" it is intentional, orchestrated, conspired and carried out by Representatives in the Foreign Interest. American Industry has been under attack by these Conspirators for a hundred years, and now it is plenty obvious to me that it isn't by accident. The Corporate Income Tax is known to be Regressive, just like the Sin Taxes are regressive. The biggest secret in America is how the poorest among us pay the highest percentage of tax! (True because they have so little income to begin with.) The Fines, Fees, Penalties, Income Tax of any kind all fall most on those with the least. Right now American Children are going to pay for all this in the end with De Facto Slavery (starting with their Student Loans: Big Junk Education for 'necessarily skyrocketing prices'.)

      The House Of Representatives has to start collecting Affidavits and Complaints from Americans, establish Damages from Unconstitutional Forms Of Government. Progressives have been perpetuating poverty with their Socialist schemes, and I'd swear it is all illegal. The incomprehensible fact our Government has set American Workers at a Competative Disadvantage, sent our jobs overseas, is more grist for my mill. The Government has been usurped by Communists who intend to bring our great nation to her knees. I'm serious, Americans! Write up your Damages and send it to the House!

    12. Homer N. Jethro; Gra says:

      May I give some additional consideration for thought? Many of these ideas are great but until the over regulation by government agencies at all levels (federal, state, county, and local) is stopped or at least greatly diminished the USA cannot become a manufacturing economy again. Example: you and me, we decide to go into business and make widgets. We start in your garage or my barn. The folks from OSHA want to know about the ventilation, lighting, heating, and air-conditioning as well as any other safety concerns ie gasses, fumes, hazardous substances (which include white-out because it is flammable) and storage, disposal, usage, and consumption rates etc. You are told by a large customer that an order would be placed for holiday widgets if we can paint them red or green. We decide this is good so we look into painting the widgets. Did you ever see the specs from government regs about paint booths (latex, acrylic, oil, enamel, etc.), of any kind? By this time EPA is "sniffing" around your garage and my barn. It makes us nervous but we try and "comply" with all of the "regs." No one is hurt in our work force or complaining but now a customer dropped a widget on their foot and it is somehow our fault. We are now being sued for our manufacturing plant and all or our combined assets and $900,000,000,000,000,000,000.00 more than the national debt. Although the jury at the appellate level only awards a 3.17% partial-guilt finding to our "suer,” (same as sewer) we are now out of business and everything that we have worked our entire adult lives for is gone.

      It is simply too much difficulty and risk to start manufacturing in the USA. Take a quick look at Rwanda's stats for manufacturing enterprises and it quickly shows how far the USA has fallen. Don't get me wrong, I hope the USA returns to a manufacturing based economy but it seems very probable to me that it will take more than a favorable tax rate to do it.

    13. John, Cincinnati says:

      1. It's misleading to speak of marginal tax rates without also considering effective tax rates. In contrast to the high marginal rates referenced in the post, there are highly-profitable corporations that pay no or minimal taxes. I'd consider lowering marginal rates if we could also close loopholes, but I suspect that many corporations might prefer the current arrangements.

      2. The idea that corporations simply collect, rather than pay, taxes is something of a canard. This ability depends upon the corporation's pricing power, that is, its ability to pass to pass changes in input pricing on to customers, which is a variable, but rarely 100%. Also, when we as individuals set the price of our own labor, we must consider our tax obligations when doing so. In a sense, some level of tax transference takes place every time a dollar changes hands.

    14. William Sanford, Pittsburgh Pa says:

      Our current president campaigned on a promise of making our nation more in-line with the rest of the planet. The rest of the planet does everything so right that we need to follow their example. Why is the line representing the tax rate in the United states the only line going up?

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    16. Lisa, Georgia says:

      I agree with Dennis and Larry. Enact the FairTax!

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    18. Jim Bennett, Summit says:

      The United States has a clear chance to leapfrog over our more competitive OECD neighbors by enacting the FairTax, thus bringing the US Coarporate Income Tax Rate to a zero. The idea at first blush is redical, but people pay the corporate income taxes at the end of the day. The tax burden goes from being front-loaded to being back-loaded, but in the process becomes more transparent, efficient, friendly to economic growth and fiar.

    19. Bill, Randleman N.C. says:

      Call your Senetors,and House of Rep. in the 112th Congress to sign up to be co-sponsors of {H-R 25},{S-296}. The 2012 elections are right around the corner.The FairTax should be priority #1,and Herman Cain has the right stuff to be considered.

    20. PJY says:

      How about a permanent tax holiday?

    21. Scott Greene, Califo says:

      The Income Tax system is a psychotic legal system and only gets worse year after year after year.

      Citizens and businesses of this country spend billions of dollars a year and then spend billions of hours in attempted tax compliance. This just to figure out what they owe or don't owe in Income taxes.

      The Income Tax code itself is made up of 9,834 sections comprising more than 16,845 pages of arbitrary and contradictory laws and opinions.

      This plus an additional two-and-a-half million more pages of Income Tax Regulations, Income Tax Revenue Rulings, Income Tax Letter Rulings, Income Tax Memorandums, Income Tax Publications, plus Tax Court, Federal Court and Supreme Court Opinions. These are all written in an effort to explain and/or argue about the mind-numbing Income Tax laws.

      Most personal, financial and business decisions all have to take into account this Income Tax system and generally require expensive assistance from tax accountants and lawyers who all have different opinions on how to apply the Income Tax legal code.

      They themselves do not understand many facets of the Income Tax code, the same way most government officials do not understand it (try calling them up and getting a consistent answer to the exact same tax question – good luck on that).

      This is no way to fund a government!

      Unless something is done to get rid of this “system” (like instituting the Fair Tax), this Income Tax scheme is going to continue to wreak havoc on the United States economy and its citizens

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    23. Jim, New York says:

      Yes, US tax rates are high — but few corporations actually pay that rate. US corporate tax receipts as a % of GDP is low/in-line with other OECD countries (http://www.oecd-ilibrary.org/sites/20758510-2009-table5/index.html;jsessionid=7ms4fd9c76dtc.delta?contentType=/ns/KeyTable,/ns/StatisticalPublication&itemId=/content/table/20758510-table5&containerItemId=/content/tablecollection/20758510&accessItemIds=&mimeType=text/html) and the effective tax rate is similarly in line.

      Given the historic level of profits by US corporations, it seems that the screaming about taxes driving away business is a canard.

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    25. Bob, CA says:

      Check both corporate and individual. Most countries with lower corporate tax rates have higher individual rates. E.g. Germany, Sweden, Denmark = high individual tax rates. However, for those high rates people get free university education and free health care. So do they really pay more?

      One way or another, nations have expenses. Higher individual tax rates don't lower their standard of living.

      After all the loopholes, U.S. corporations are famous for paying very little in taxes.

    26. Felix, New Haven says:

      John in Cincinnati is right. The US has high corporate tax rates, but low effective rates. The effective rate in 2006 was only 3.4%:

      http://www.cbo.gov/publications/collections/tax/2

      Also, the Fair Tax is an alluring idea but the rates are actually higher than represented, and as proposed is more regressive than our current system.

      http://www.factcheck.org/taxes/unspinning_the_fai

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    33. Bryan@turbotax says:

      I still don't understand why corporations and millionairs say they pay too much in taxes but really, the tax codes allow them to write off 90% of their expenses. At the same time, people who don't own a house and don't own a business do not have any tax write offs and therefore, pay the expected amount of tax based on the tax tables. If all Americans paid their fair share, then we would not have a national debt, but allowing so many tax cuts has caused our debt problem.

      • guest says:

        It's because the rich want others to pay the taxes. The ,Don't tax the Rich" , really means let others be taxed.

    34. Richard Colman, Orin says:

      On a profit of $1 million, a typical American corporation will pay $400,000 in corporate income taxes. If the $400,000 are distributed to owners, let the owners (as part of their personal income tax) pay any taxes. If, however, the $400,000 are invested in new jobs, new products, and new productivity-enhancing technology (like computers), there should be no corporate income tax.

      Richard Colman

      Orinda, CA

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    36. richard says:

      What is the corporate income tax after all the loopholes are exhausted?

    37. Guest says:

      But, the questions are. Do other countries have a good percentage of corporations that pay 0 taxes. As, we have in the US. And, what are the individual tax rates in those countries. Are they lower as well or higher? Many countries hav very high tax rates.

    38. John F says:

      What a load of garbage! The US has the highest corporate tax rates ON THE BOOKS!!!! No one pays those rates because of all the loopholes!!! Try closing the loopholes and leaving the rates the same. That'll raise some dough.

      As far as the FAIR Tax goes, it's not fair at all. It disproportionately burdens the middle class. A $5000 tax bill for a family making $50K is a much greater burden than a $50 million tax bill would be to someone making $500 million. PLUS, the middle class family (or should I say, the MILLIONS of middle class families) will put that money right back into the economy by buying good and services that they need. The guy making $500 million will not buy $50 million in consumer goods and services.

    39. James Fauerbach says:

      The effective corporate tax rate (what is actually paid after deductions, deferrals and credits) is only 15%. If you're going to complain, do it accurately.

    40. toledofan says:

      The only way to make the government work is to cut the size, reduce all the unnecessary spending, and rein in the waste. That's the solution, period. So, until we demand that these guys do their jobs nothing will change. I think we've come to the edge of the cliff, we either jump and hope for the best or we spet back and reassess what the heck we're doing. It's obvious the first and most important step is to vote Obama out in November. If we don't, then, it's going to be a terrible fall. Heritage keep up the truth telling.

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