America’s Self-Punishing Corporate Tax

In a short post over at CATO@Liberty, Daniel Mitchell comments on a new KPMG global survey of corporate taxes, pointing out the obvious fact that it punishes American companies for keeping jobs in America.

KPMG has released its annual global survey of corporate tax systems. For the 10th consecutive year, the average corporate tax rate fell, and it is now down to 25.5 percent — and just 23.2 percent in the European Union!

In the United States, unfortunately, the corporate tax rates remains stuck at about 40 percent. Only one developed nation, Japan, has a more punitive regime.

That’s something to keep in mind the next time a politician complains that jobs are going to China, where the corporate tax rate is 25 percent.

Take a look at the KPMG survey data here.  It is interesting to contrast what some other countries are doing compared to the US.  From the KPMG survey:

Country 2003 2004 2005 2006 2007 2008 2009
US 40 40 40 40 40 40 40
UK 30 30 30 30 30 28 28
Russia 24 24 24 24 24 24 20
Germany 39.58 38.29 38.31 38.34 38.36 29.51 29.44
Canada 36.6 36.1 36.1 36.1 36.1 33.5 33
India 36.75 35.875 36.5925 33.66 33.99 33.99 33.99

Note the far more sensible response to the economic downturn from countries like the UK, Russia, and Germany.

Corporate taxes are simply indirect taxes on individuals, essentially hiding the staggering scale of the cost of government by building it into the cost of goods and services.  When you hear politicians in the US talk of a possible Value Added Tax they are looking for more of the same, dishonestly hiding the costs of government in the prices that consumers pay for the items that they buy every day.

Clearly the best thing that could happen for American taxpayers would be the abolition of corporate taxes and the income tax, replacing them with something like the FairTax.

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2 responses to “America’s Self-Punishing Corporate Tax

  1. That argument has been used ad nauseum by right-wingers. The fact is, most corporations pay little or no taxes. There are all sorts of loopholes and deductions they can use to cut their taxes.

  2. Ben Hoffman said “..most corporations pay little or no taxes. ”

    Really? What is the basis of your claim? When you use the word ‘most’, if you are referring to numbers as in the majority – the majority of companies in the US are sole proprietorship, limited liability or Sub-S. Taxes for these are paid directly by the owners/shareholders.

    C-Corporations pay corporate taxes based upon their net revenue and yes there are a number of deductions available to them, as there are to individuals.

    I agree that some of these deductions are ‘questionable’ (to say the least) – so in fact you are arguing in favor of the FairTax which does away with the very loopholes you (and I) dislike.

    Have you even read any of the studies on the FairTax written by noted ecnomists that know far more on the topic than you or I.

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