High Corporate Income Tax Rate Driving Jobs Overseas

Curtis Dubay / May 05, 2010

The United States has the second highest corporate tax rate of any of the 30 countries in the Organization for Economic Cooperation and Development (OECD) – a collection of the most economically developed countries in the world. The federal rate is 35 percent. Add on the average state corporate income tax and United States businesses pay a top rate over 39 percent. This is just below Japan which has a rate slightly over 39.5 percent.

The average corporate income tax rate in the OECD is about 25 percent. The United States’ rate is almost 15 percentage points higher. Of the 30 countries in the OECD, 27 of them have cut their corporate income tax rates since 2000. By standing still, the United States has fallen behind.

The top marginal tax rate is the tax rate a business will pay on new investment, so it is an important determinant for businesses when they make decisions about where to locate new facilities. The high U.S. corporate income tax rate is driving jobs overseas as businesses work to remain as competitive as possible in the global marketplace. It doesn’t help that the United States is the only country in the world that taxes its businesses on the income they earn in foreign countries. Every other country only taxes businesses on the income earned within their borders. A reduction of the corporate income tax rate down to at least the average 25 percent rate in the OECD is long overdue. (more…)