The Tax Foundation has released a new report comparing corporate tax rates around the world. The reports shows that the U.S. corporate tax rate is now higher than corporate tax rates in a large majority of the countries in the world. According to this study, 68% of the countries in the world now have a lower corporate tax rate than the United States.
In the past two decades, most of our foreign competitors have reduced their corporate tax rates, recognizing the damage high corporate tax rates have on their economies and their ability to compete. Since the U.S. reduced the corporate tax rate to 21% in 2017, fifty-three countries have reduced their own corporate tax rates to improve their ability to compete around the world.
According to the Tax Foundation, the average corporate tax rate in the world is 23.5%, lower than the current combined U.S. federal-state tax rate of 25.8%. Our global competitors have been lowering their corporate rates, giving their companies a competitive advantage over US firms.
The average corporate tax rates in Asia (19.7%) and Europe (20.18%) are nearly one third lower than the U.S. rate. The average OECD rate is 10% lower at 23.85%. Even the four Scandinavian countries now have a lower average corporate tax rate (21.15%) than the U.S.
The U.S. rate is also significantly higher than the 15% rate China applies to industries encouraged by the Chinese government, including high-tech and software, and business sectors critical to their global supply chain.
A number of Members of Congress have been pushing for a higher corporate tax rate. But any increase in the U.S. rate would put U.S. firms at a greater disadvantage against much of the world. Increasing the rate to 25% (for a combined rate of nearly 30%) would put the U.S. rate higher than 90% of OECD countries, and 15 percentage points—97%—higher than the rate China sets on its most important business sectors.
The Tax Foundation notes that raising the rate even one or two points would reduce economic output, investment, and wages, resulting in a larger reduction in real GDP than revenue raised.
Congress needs to maintain or further reduce the U.S. corporate rate to keep American firms competitive around the world, and reject any attempt to raise the U.S. rate.
The U.S. Economy Would Profit From a Competitive Corporate Tax Rate
January 17, 2025
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