September 13, 2011
U.S. Corporations Suffer High Effective Tax Rates by International Standards
For a PDF of the full study, click here. A summary of the report and the key findings are below.
Tax Foundation Special Report No. 195
• The U.S. has the second-highest statutory corporate income tax rate in the developed world. Despite anecdotes regarding a few companies that exploit the dubious carve-outs in the tax code to minimize their tax liabilities, the results of 13 unique studies of the effective tax rate on corporate investment across the globe show that the average U.S. effective corporate tax rate, like the statutory rate, is nearly the highest in the world.
• By every available measure, the U.S. imposes a very high tax burden on its corporate sector, in comparison to other nations, even after credits and deductions are considered.
• The most recent studies show that the average effective corporate tax rate for corporations headquartered in the U.S. is roughly 27 percent, while the average of other nations is about 20 percent. The effective average rate for new investment in the U.S. is roughly 29.8 percent, 7.4 point above worldwide competition.
• The U.S. effective corporate tax rate consistently ranks among the five highest of nations considered. The only nation with a higher effective tax rate in each study is Japan, which not by coincidence is the only developed nation with a higher statutory rate than the U.S.
• The literature shows that high corporate taxes and high effective tax rates are detrimental to attracting investment, and subsequently detrimental to economic growth.