May 5, 2006
New Study Finds Most OECD Nations Cutting Corporate Tax Rates
For immediate release
Media contact: William Ahern (202) 464-5101
WASHINGTON, D.C.—The U.S. is lagging behind its major trading partners in a worldwide trend toward lower corporate tax rates, according to a new study from the Tax Foundation.
“One of the ironies of tax policy during the Bush presidency is that five years of tax-cutting legislation have left the corporate income tax rate unchanged,” said staff attorney Chris Atkins, co-author of the new report with the foundation’s president, Scott A. Hodge.
The Ways and Means Committee of the House of Representatives will begin hearings May 9 on corporate tax reform, and U.S. lawmakers will confront a worldwide trend of rate-cutting that has left the U.S. with higher statutory rates on corporations than almost every nation in the Organization for Economic Cooperation and Development (OECD).
Most of those nations do not have a second layer of corporate income taxes at the state level as the U.S. does. As a result, tax writers at the federal level in the U.S. need to take that into account when deliberating how high the federal corporate income tax rate should be.
“While the U.S. has had the same corporate tax rates since 1994, our trading partners have aggressively cut corporate tax rates,” said Hodge. “As a result, we’ve gone from 6th highest to 2nd highest in the past six years—without raising our rate. As the House of Representatives contemplates corporate tax reform, one of the major goals should be a lower corporate income tax rate.”
Lowering the federal corporate income tax rate would have many benefits, according to the study. These include competition for international investment, increasing the competitiveness of state tax systems, lessening the pressure for states to use tax incentives to attract economic development, and making it less likely that U.S. multinationals will engage in profit-shifting to lower-tax countries.
“Lawmakers across the political spectrum are moving to reduce corporate tax rates in other OECD countries,” said Atkins. “The U.S. is in danger of slipping further behind by continuing to do nothing about our high corporate tax rates.”
The report is titled, “U.S. Lagging Behind OECD Corporate Tax Trends,” Tax Foundation Fiscal Fact, by Chris Atkins and Scott A. Hodge. The full study is available online at http://www.taxfoundation.org/publications/show/1466.html.
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
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