America The Uncompetitive
Submitted by CARPE DIEM
TAX FOUNDATION — 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% higher than the OECD average (see chart above showing US tax rate of 39.3% vs. 26.2% for non-US OECD).
The U.S. continues to have the second-highest combined federal-state corporate tax rate among industrialized countries at 39.3%. Only Japan has a higher overall corporate tax rate at 39.5%. By contrast, the average corporate tax rate among OECD countries has fallen a full percentage point in the past year, from 27.6% to 26.6%. Ireland’s 12.5% corporate tax rate remains the lowest among OECD nations.
The release of these two OECD studies could not have come at a better time for the current political debate over how to move the U.S. economy forward. A U.S. corporate tax rate 50 percent higher than the OECD average should be a wake-up call to Washington, especially when combined with the empirical evidence that corporate taxes are the most harmful tax on economic growth. The question remains for the presidential candidates, What is your plan to restore American competitiveness?
The WSJ has a related editorial today, which concludes that “Every month that goes by without tax reform, America is a relatively less attractive place to do business. Over the past 18 months, nine of the 30 most developed nations and 20 countries world-wide — from Israel to Germany to Turkey — have cut their corporate tax rates. Nations are slashing rates to attract capital and jobs from the U.S., and the tragedy is that our politicians keep making it easy for them.”
MP: Below is a Tax Foundation chart (click to enlarge) showing how the McCain and Obama tax plans compare to each other, and to the current tax law. Note that McCain would cut the corporate tax to 25% while Obama would leave it at 35%.
