The Tax Foundation - New Ranking: Major U.S. Trading Partners Cut Corporate Tax Rates While U.S. Stands Pat with Second-Highest Rate

July 24, 2007

New Ranking: Major U.S. Trading Partners Cut Corporate Tax Rates While U.S. Stands Pat with Second-Highest Rate

For more information, contact: Nate Bailey at (202) 464-5102.

U.S. one of two countries that have not cut rates in past 12 years

Washington, DC, July 24, 2007 - The U.S. has the second-highest corporate tax rate in the OECD and is one of only two countries that have not reduced their rates since 1994, according to a new review of international tax rates by the Tax Foundation.

Five countries cut their corporate income tax rates in 2006, seven more will have cut their rates by the end of this year, and Germany recently announced a planned cut on January 1, 2008.

Despite its high corporate tax rate, the U.S. collects less revenue as a percentage of GDP than most other OECD countries, even those with much lower statutory tax rates," said Chris Atkins, senior tax counsel and co-author of the new study. "The United States is one of only two OECD countries not to cut corporate tax rates in the past 12 years. That has pushed us further and further behind in a highly competitive international marketplace."

U.S. lawmakers should consider enacting a substantially lower federal corporate income tax rate, according to Atkins. Taking into account state-level corporate income tax rates (which don't exist in most other nations), the cut would have to be at least 10 percentage points to get the U.S. rate down to the OECD average.

In the Foundation's Fiscal Fact series, No. 96, "U.S. Still Lagging Behind OECD Corporate Tax Trends," Atkins cites four benefits of doing so:

A lower effective tax rate on new investment in the U.S. would steer international investment our way.
U.S. multinationals would feel less pressure to engage in corporate inversions and other forms of profit-shifting.
U.S. companies would be more likely to reinvest foreign earnings in U.S. companies.
State governments would feel less pressure to offer special tax preferences and credits in their efforts to attract new international business investment.

See Fiscal Fact No. 96 at http://www.taxfoundation.org/publications/show/22501.html

The nonpartisan, nonprofit Tax Foundation has monitored tax policy at the federal, state and local levels since 1937. Best known for its annual calculation of Tax Freedom Day^®, the Tax Foundation is a nonprofit, nonpartisan 501(c)(3) organization.