The world’s superpower is about to lead the way in yet another realm. Next month, America is set to bear the distinction of having the highest corporate tax rate in the industrialized world.
According to a study by the Tax Foundation, America’s combined federal and state rate of 39.2 percent is only out paced by Japan’s rate of 39.5 percent – which Japan plans to lower next month. Without Japan in the lead, America’s 39.2 percent will render it the corporate tax rate leader in the developed world, aka the countries comprising the Organization for Economic Cooperation and Development (OECD).
In recent years, many OECD nations have been lowering their corporate income tax to create more favorable environments for business. The Tax Foundation notes that since 2000 Germany, Canada, Greece, Turkey, Poland, the Slovak Republic, Iceland, and Ireland have all lowered their corporate tax rates by double-digits.
The study’s author and Tax Foundation president Scott A. Hodge said that one of America’s economic pitfalls will be the high corporate income tax.
“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 Ho. “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.”
The Tax Foundation’s study adds fodder to a similar warning that came from the Cato Institute in February. Cato advised that the U.S. reduce its corporate tax burden by 10 percent or more.
“A growing number of policymakers are recognizing that the U.S. corporate tax system is a major barrier to economic growth,” Duanjie Chen and Jack Mintz wrote in a Cato bulletin. “The aim of corporate tax reforms should be to create a system that has a competitive rate and is neutral between different business activities.”
Tuesday, Reuters reported that nationwide, at least a dozen states are considering reductions to their state corporate tax rates.