global tax

New Report Sounds Alarm on US Corporate Tax Rate

Oct 14th 2015
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Do your individual clients howl about paying too much federal income tax? Just wait until you get an earful from your business clients.

A new report from the Tax Foundation, a conservative-leaning think tank located in our nation's capital, found that the United States has the third-highest marginal corporate income tax rate in the world.

This latest report comes on the heels of another report the Tax Foundation released last month that said the United States ranked 32nd among the 34 member countries in the Organization for Economic Cooperation and Development (OECD) in competitive tax systems. This came as no surprise – the United States was also in 32nd place the year before.

But the latest Tax Foundation report compares the United States to 173 countries and tax jurisdictions around the globe, not just the industrialized nations in the OECD. Based on the results, the United States is only behind Chad (40 percent) and the United Arab Emirates (55 percent) when it comes to the highest marginal tax rates for corporations. (Puerto Rico tied the United States for third-highest).

The United States logged in with a top marginal rate of 39 percent (35 percent federal rate, plus an average of state and local rates). In comparison, the two countries with the lowest tax rates were Turkmenistan and Uzbekistan at 8 percent (excluding countries without corporate taxes).

The worldwide average top corporate income tax rate was 22.9 percent; 29.8 percent as weighted by gross domestic product (GDP). By region, Europe had the lowest average corporate tax rate at 18.7 percent (26.1 percent weighted by GDP), while Africa had the highest simple average at 28.8 percent.

It stands to reason that larger, industrialized countries tend to have higher corporate income tax rates than developing countries. Yet, the Tax Foundation report says the worldwide average corporate tax rate has declined since 2003, from 30 percent to 22.9 percent. In fact, every region in the world has experienced a decline in its average corporate tax rate in the past 12 years, according to the report.

“The corporate income tax rate is one of many aspects of what makes a country's tax code and economy attractive for investment,” Kyle Pomerleau, an economist at the Tax Foundation, said in a written statement. “However, as the rest of the world's economies mature and their tax rates on corporate income continue to decline, the United States risks losing its competitive edge due to its exceptionally high corporate income tax rate.”

Related article:

US Lags Behind Most OECD Countries in Tax Competitiveness


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