Monday, August 18, 2008

U.S. Corporate Taxes Now 50 Percent Higher than OECD Average

The Tax Foundation recently completed a study on how United States Corporate tax rates compare to other countries around the world. The graph below shows how our tax rate has remained rather constant, while other countries rates have lowered over time. Also below is a quote from the article accompanying the study, you can read the full text here.

“Amid rising concerns about the state of the U.S. economy, new data compiled by economists at the OECD shows that for the 17th consecutive year the average rate of corporate taxes in non-U.S. countries fell while the U.S. corporate tax rate stayed the same. As a result, the overall U.S. corporate tax rate is now 50 percent higher than the OECD average.

Combined with another new OECD study that calls the corporate income tax the most harmful type of tax for economic growth, the implications for U.S. policy are clear. The long-term prospects of the U.S. economy are at risk as long as our corporate tax rate remains out of step with the rest of the world.

The U.S. continues to have the second-highest combined federal-state corporate tax rate among industrialized countries at 39.3 percent. Only Japan has a higher overall corporate tax rate at 39.5 percent. By contrast, the average corporate tax rate among OECD countries has fallen a full percentage point in the past year, from 27.6 percent to 26.6 percent. Ireland's 12.5 percent corporate tax rate remains the lowest among OECD nations.

The OECD data shows that nine of the 30 OECD member nations have lower corporate tax rates in 2008 than in 2007, including Canada, Germany, New Zealand, Spain, the United Kingdom, Italy, Switzerland, the Czech Republic and Iceland. Germany made the biggest change, cutting its corporate rate 8.7 percentage points from 38.9 percent to 30.18 percent. Consequently, Germany fell from having the third-highest overall rate to seventh highest. France now imposes the third-highest rate of 34.4 percent.

Italy had the second-largest rate cut, lowering its rate 5.5 percentage points, from 33 percent to 27.5 percent. Consequently, Italy dropped in the rankings from seventh highest to fifteenth highest. Canada, meanwhile, dropped from fourth- to fifth-highest after cutting its overall corporate rate from 36 percent to 33.5 percent.”

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