U.S. Corporate Tax Rate Highest in the World!

U.S. Corporate Tax Rate Highest in World

We're No. 1!

But that's the bad news. After a reign as the nation with the second highest corporate income tax rate, the United States is set to move into first place when Japan lowers its rate next month.

The combined federal and state rate in the U.S. is 39.2 percent of corporate profits, a new analysis by the Tax Foundation disclosed. When Japan, which currently has a rate of 39.5 percent, enacts a planned cut of 4.5 percentage points in April, America will have the highest rate of all the economies in the Organization for Economic Cooperation and Development (OECD), the group of 34 advanced nations with economies most comparable to the U.S.

"United States companies are now in the position of trying to compete in the 21st-century world economy with a 20th-century tax system," said Scott A. Hodge, the Tax Foundation's president and author of the new study.

America has moved to the top of the corporate tax list not by raising taxes but through inaction. Between 2000 and 2010, nine OECD countries cut their corporate tax rates by double-digit figures, and almost every OECD nation has cut rates to some extent.

In the United States, on the other hand, the rate has remained essentially unchanged during that 10-year period.

Germany, which had the highest rate in 2000, 52 percent, has slashed its rate to 30.2 percent, and Canada, No. 2 in 2000, cut its rate from 42.57 to 29.52 percent.

The rate in Ireland is now just 12.5 percent, while in Iceland it is 15 percent and in Chile, 17 percent. Four other OECD nations have a rate lower than 20 percent.

Worldwide, about 75 countries have cut their rates since 2006, according to the Tax Foundation.

But 2011 marks the 20th year in which the U.S. statutory tax rate has been above the average of OECD nations.

For the United States to move to the OECD average and match China — which significantly lowered its rate in 2008 — the federal rate would have to be reduced to 20 percent.

"The scope of corporate tax reform so far endorsed by the White House would fall far short of this goal," the Tax Foundation stated.

Hodge said: "Dozens of countries around the world — including many of the United States' closest trading partners — have realized that sky-high corporate tax rates are an economic dead end.

"Now more than ever, Americans want to see policies that will help create increased growth, more jobs, and higher standards of living — exactly the things that a lower and more streamlined corporate tax system can help achieve."

And the National Center for Policy Analysis, commenting on the Foundation's report, observed: "As other nations enact reforms and rate cuts, the U.S. corporate rate will continue to stand out as a hindrance to economic growth and competitiveness unless lawmakers move to lower the tax burden for businesses."