The U.S. is about to have the highest corporate tax rate in the developed world because our competitors have noticed that revenue goes up as rates go down. Multinational corporations today nimbly move their profits to the friendliest environment, rewarding tax havens like never before.Read the complete Bloomberg opinion piece here.
It looks as if President Barack Obama and congressional Democrats are going to miss out on the single biggest policy opportunity for the U.S. this year because of their ideological resistance to the idea that lower rates can increase revenue, also known as the Laffer curve.*** Corporate taxes “are the most harmful type of tax for economic growth,” according to a November 2010 report by the Organization for Economic Cooperation and Development.*** The U.S. top corporate tax rate of 35 percent in 2010 was higher than all other OECD nations except Japan, which has embarked on a 5 percentage-point cut. The average rate in the OECD is 23.5 percent. Ireland’s rate is only 10.9 percent; Turkey’s is 13.1 percent.*** The U.S. earns less federal corporate tax revenue, as a percentage of gross domestic product, than the average OECD country. Higher rates, lower revenue.
From 2000 through 2009, the U.S. average corporate tax revenue as a percentage of GDP was 2.06 percent, according to OECD data. The average for the rest of the OECD was almost a percentage point higher, at 3 percent.
In 2009, the U.S. ratio dropped to 1.64 percent. That year, the U.K., with a tax rate of 28 percent, raised 2.8 percent of GDP. South Korea raised 3.4 percent of GDP with a rate of 22 percent. Belgium raised 2.5 percent of GDP with a rate of 34 percent.
A number of studies have indicated that a Laffer curve exists for corporate taxes. One study I did with Alex Brill, looking at data for OECD countries from 2000 to 2005, found that the U.S. could maximize its tax revenue by cutting the top corporate rate 8.6 percentage points, to 26.4 percent.
Addendum: Also see my later post, "High US Corporate Tax Rates Are Driving Investments Abroad" where I have a chart of effective average corporate tax rates that show the US has one of the highest effective tax rates in the world.
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You state that the "the U.S. top corporate tax rate of 35 percent" -- which is essentially the statutory rate. The effective rate (loopholes & deductions factored in) make it a lot less than 35 percent. When you look at the long term revenue streams for the US, it's undeniable that the burden has been placed on individuals. In 1940, the revenue share was the same between individuals & corporations. In 2010, corporations paid less than 1/4 the revenue that individuals pay. It seems the statutory rate is moot. What Congress should do is go after the flawed tax-code and corporate entitlements to get us back to the balance we once we had.
ReplyDeleteSee my later post where I list effective average corporate tax rates. US effective corporate tax is one of the highest in the world.
ReplyDeletehttp://misunderstoodfinance.blogspot.com/2011/02/high-us-corporate-tax-rates-are-driving.html
See my article titled: "Corporate Executives Deny 57 Million Americans Healthcare - compiled by Bill Woollam"
ReplyDeletehttp://www.blissful-wisdom.com/corporate-executives-deny-57-million-americans-healthcare.html
It is so obvious that declining corporate tax rates pushed for by OECD Member countries since the late 70's have resulted in less government revenues for maintenance of schools, supplying inexpensive and universal healthcare,and subsidized tuition fees for all citizens in need.
Of course, the corporate sector has since successfully lobbied the OECD member countries.
With tax loopholes,and added write-offs for specific corporations, less revenue is collected in America than 25 of the other OECD member countries.
Why does a country like America exemplify such lack of regard for its citizens while favoring corporate welfare?
My conclusion, and I am but a simple man, is that globalisation is nothing but con job by corporate oligarchs.
I support President Obama in their ideological resistance to the idea that lower rates can increase revenue. It seems fair and reasonable too. Thanks for such post.
ReplyDeletevery rightly pitched that tax rates goes down and revenu goes up.I think it also promotes the thing which is healthy for the economy.Payday Loan
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ReplyDeleteObviously if the tax rates for the corporates will be lowered down then many company will not hesitate in paying off their due tax of the year.It will certainly grow the amount and also economic development as well.
ReplyDeleteI think Obama is really doing right and I completely respect his insight into the matter. I hope he will do the magic in result of such step.
ReplyDelete