U.S. Corporate Tax Rate To Be Highest In The Developed World

* Japan's corporate tax rate dropping to 38.01 pct on Sunday

* Combined U.S. 39.2 pct rate will be developed world's highest

By Patrick Temple-West and Kim Dixon

WASHINGTON, March 30 (Reuters) - The United States will hold the dubious distinction starting on Sunday of having the developed world's highest corporate tax rate after Japan's drops to 38.01 percent, setting the stage for much political posturing but probably little tax reform.

Japan and the United States have been tied for the top combined, statutory corporate rate, with levies of 39.5 percent and 39.2 percent, respectively. These rates include central government, regional and local taxes.

Japan's reduction , prompted by years of pressure from Japanese politicians hoping to spur economic growth, will give that country the world's second-highest rate.

This has triggered complaints from U.S. politicians and business groups.

"This isn't an April Fool's Day joke," said Senator Orrin Hatch, the leading Republican on the Senate Finance Committee.

"Every industrialized country around the globe understands that tax rates can determine whether or not businesses succeed or fail," Hatch said in a statement.

Across most of the political spectrum there is broad agreement that the U.S. corporate tax rate is too high, though few corporations actually pay that rate because the loophole-riddled tax code gives them lower "effective" rates.

Republicans and Democrats agree that the tax code needs work. It has not been thoroughly overhauled in 25 years.

In February, President Barack Obama proposed a corporate tax reform blueprint that included a 28 percent top rate.

Republican presidential hopeful Mitt Romney has said he wants to cut the corporate rate to 25 percent.


COMPETITIVE EDGE

The average 2012 corporate tax rate for the 34 developed countries is 25.4 percent, according to the Organization for Economic Co-operation and Development.

"As countries such as Canada and the United Kingdom have moved to reform their tax systems and lower rates to encourage economic growth, America's inaction puts American worldwide companies at a competitive disadvantage and threatens our economic recovery," said Bruce Josten, an official at the U.S. Chamber of Commerce.

Some U.S. companies pay close to the 35 percent top corporate tax rate; some pay nowhere near that, thanks to tax breaks that let them lower their "effective" tax rates.

Of the 30 companies in the Dow Jones industrial average, 19 told shareholders their effective rate for their 2011 fiscal years, mostly ending Dec. 31, was below Obama's proposed new tax rate, according to a Reuters analysis of securities filings.

Of these companies, three - telecom company AT&T, Bank of America, and insurance company Travelers - posted a tax gain.

For the index's other 27 companies, effective rates reported ranged from 2.7 percent for telecom giant Verizon Communications to 43.3 percent for energy group Chevron Corp.

These figures are taxes for shareholder accounting but not necessarily what was paid last year because Congress lets companies defer parts of their income tax for future years.

Comments

[kannbrown65]

09:07 AM on 05/09/2012

With the loopholes and subsidies, almost no corporation PAYS that rate. I am pretty sure the same isn't to be said in those other countries. While I don't mind lowering it, close the loopholes, and tie any tax BREAKS to behaviors (and RESULTS, don't just say this is why we do it, to get the tax break, the corporation has to show that result), TIE it to them.

[David Cleinman]

09:54 AM on 04/08/2012

It doesn't matter what the tax rate is when there are so many ways of avoiding paying these taxes. That much should be obvious by now. 50% would be completely fair. Corporations make their profits off the people who buy their products and services. Why should those same customers (us) have to then foot their tax bills? Corporations benefit from a financially healthy citizenry, and making people poor, so the corporations can enjoy high profits with no tax liability, is not healthy for anyone, corporations included.

[Political Preston]

01:10 PM on 05/02/2012

Do those same evil corporations provide goods and services to you that you enjoy? Do they not produce the computer/phone/tablet you used to post your comment with? Do they not provide the internet connect you used? DO they provide the raw materials to build the house/domicile you line in? Do they not provide you with a job for you to earn a wage to buy the services and products you enjoy?

If you have an issue with the tax code, then push to get the tax code fixed. Hell, why not repeal the 16th amendment all together? WE didn't have a federal income tax prior to it and we were not trillions in debt to foreign countries and a world banking system as we are today.

[kannbrown65]

09:10 AM on 05/09/2012

For which the consumer pays MONEY. But please, don't talk jobs. Not when they are cutting salaries, benefits, and outsourcing. All in the name of MORE profits. It'd be different if their profits were flat, or they were barely making it, but corporations are making RECORD profits, and then acting like this. Sure, let's go back to before we had a 16th amendment. Heck with the 50's that most want to go back to, the GIlded Age, that's where its at. Let's forget about the workers conditions, wages, air, water, or those rounds of bank failures (no, that didn't start in the Great Depression....). Pre-1913, that's where it's at.

[Tom Heinrich]

04:13 PM on 05/12/2012

Every dollar the corporation is taxed goes INTO the price YOU pay for the product. Good God in heaven, when are you people going to realize that it is our Government that is running businesses to other parts of the world, NOT the labor costs.

[Gabriel Elias]

01:09 PM on 04/07/2012

Only in America.Ok so companies want to send all the jobs overseas to save money then on top of that want to pay lower taxes.If a company is making over a billion dollar in profit a year they should pay high taxes to help this country the country that they sale most of the products.Maybe change it so that companies pay a high product tax for every sale they make.APPLE sales an ipad for $400 dollars well tax the company 30 percent for the sale of the item.That would insure that companies pay their fare share.The more you sale the more you pay.Now days companies are greedy they make unrealistic profits and still want more money meaning tax cuts and loop holes.The mentality of this country needs to change all they worship now days is money money money.Don't care about the people or the country just on how much money they can make.

[Gabriel Elias]

11:52 AM on 04/07/2012

I personally think that the only way this country will flourish once again is if the taxes go back to how they where in 1981 before ronald reagan.Now the people whine about paying more taxes but if the country is going to die off then it's something that it must be implemented regardless if the people want it or not since it's for the better good of the nation.Prior to the tax change by reagan the country did owe but did not owe as much.For some reason if you also see the history of deficits and surpluses the country always goes more in debt when Republicans are in office.In the past people got taxed up to 70% percent now they whine about getting taxed 39 percent.This country has turned into a country that cares more about it's wants than about the needs of the nation to come out of debt and ruin.

[glasschuck1]

05:22 AM on 04/03/2012

corporations do not pay taxes! Anyone that believes they do is an illiterate and does not understand how business works. Corporations simply pass along the cost of taxes to the consumer. You, me and every other person that buys those goods and services pays the tax! So when you think you are sticking it to the corporate evil by raising taxes on them in fact you are simply screwing yourself.

[jseener]

10:12 PM on 04/02/2012

several posts are crying about corporations paying little or no tax and all the loopholes they use ... while thats up for debate lets focus on the close to 50 million americans that pay NO federal tax .. add to it that a large portion of those same ...for a lack of better term deadbeats actually get money back (earned income credit ) .... so youre pizzin and moaning about corporations that employ people, people that pay taxes , they produce a product or service that people need or want less they be unrofitable ...so typical of the envious jealous left .

[janmB]

04:03 AM on 04/03/2012

Corporations maintained their profit margins by increasing prices in order to offset their income tax liability.
No corporation makes a profit without it's workers and today people are underpaid because there are too many people for the number of jobs.
I read that US Corporations ALSO are sitting on around $1.9 trillion in surplus while millons are jobless or underemployed. I cannot imagine anything more financically un sustainable irrational and inefficient and unethical than an economic system that refuses to match surplus capital with surplus workers and machinery

[itpro]

09:28 PM on 04/02/2012

Could this be the reason nearly half of all US non-financial corporate cash holdings are held overseas? Apple Inc., Cisco Inc., Pfizer Inc., Google Inc and Microsoft Corp hold more of the $1.24tn than any other companies.

http://www.investoronline.ie/equities/half-of-us-non-financial-corporate-cash-holdings-held-overseas/

[GoodTimeFrog]

12:17 AM on 04/03/2012

Not likely. As anyone who's ever run or worked for a business knows in his sleep, the official tax percentage is a starting point, BEFORE deductions and breaks. The effective corporate tax rate is easily half or more. Have you ever read a business section or browsed a WallStreetJournal? What business ends up paying to fed/sta/local governments today has never been lower, and the really sad thing about this is even some well-educated, MBA types are so blinded by partisanship they can't/refuse to see it!?

[itpro]

10:25 PM on 04/05/2012

That response doesn't explain why nearly half of all US non-financial corporate cash holdings are held overseas. Try again.

[jeffrey678]

07:36 PM on 04/02/2012

But let’s be clear, corporations are not individuals; they are collections of individuals. Often, individuals hide behind this collective using the corporate veil to shield themselves from sanction for behavior that abuses individual liberties. In a very real sense, the rights and liberties of businesses and individuals often come into conflict. A real libertarian would always favor the individual in that conflict. A corporatist would favor the corporation. That’s the difference.
http://www.creditwritedowns.com/2011/02/corporatism-masquerading-as-liberty.html

[David Engage America]

05:12 PM on 04/02/2012

There is no question that we must overhaul our out-of-date corporate tax code. The most sensible way to reform the corporate tax code is by rebuilding it from scratch using the sensible guidelines outlined in the Bowles-Simpson plan.

With Bowles-Simpson type reform Congress can simplify the tax code, improve fairness, and spur economic growth through increased corporate competitiveness. http://bit.ly/noTDPF

[novenator]

01:06 PM on 04/02/2012

Oh, this old conservative distortion again. You see, THIS is why I say in all honesty that truth has a liberal bias, because corporate conservatives constantly regurgitate this misleading talking point, and are constantly debunked.

Yes, the US has one of the highest corporate tax *rates* in the world, but thanks to tax dodging schemes like loopholes, write offs, and moving corporate HQ's to overseas tax shelters, the *real* tax rate paid by corporations in the US is nearly the lowest in the world.

Here is the graph so you can make a country by country comparison: http://thinkprogress.org/economy/2011/07/05/260535/graph-corporate-tax-second-lowest/

An infographic: http://digg.com/news/politics/corporate_taxes_1955_vs_2010_pic

An explanation of how corps get away with this scheme: http://www.cbpp.org/cms/?fa=view&id=784

2/3rds of corporations pay NO taxes at all: http://www.cbsnews.com/stories/2008/08/12/national/main4342535.shtml

Will the conservatives apologize now and admit they are wrong? Doubtfully. When debunked and proven to be liars, they just stick their fingers in their ears and say "no, no, no, NO, NO! NO! NOOOOO!".

[AskandThink]

03:36 PM on 04/02/2012

Always two sides to a total financial equation and one bottom line. Really sticks in my craw when someone wants to just focus on one piece of data or one side....

Thank you for the great info!

[evershiftingcenter]

05:28 PM on 04/02/2012

Thankyou for posting this, I knew exaclty where this headline would take some and was hoping someone would mention this fact.

[Ben Wilson]

01:04 PM on 04/02/2012

Taxation is like a miasma of human detritus. I think we'd all prefer just 1 big tax than the funk of a thousand different costs. Perhaps that's just the UK though, I'm sure our government is that petty we've even got a tampon tax.

[AskandThink]

10:12 AM on 04/03/2012

I believe that's called the Resale tax...and includes diapers I believe.
(Seriously ewwwwwwww!)

[StopMakingSense2]

12:44 PM on 04/02/2012

Maybe so but what of the actual tax rate after the avalanche of tax breaks the rubepublicans have given them? Some pay none making our corporate tax rates the lowest in the world!

[maraidia]

12:38 PM on 04/02/2012

And again the 99% will be making up the deficit.

[AfroMacnerd]

11:55 AM on 04/02/2012

The only question which corporation actual pay the full Tax? NONE! These corporations have so many tax loop holes many have never paid any tax.

[dukeitout]

11:41 AM on 04/02/2012

We need a 20% flat corporate tax rate in America. But I doubt the republicans would permit this, since their lobbyists are able to bribe their favorite politicians, for their favorite companies, to provide an actual rate much lower than 20%. The current very high rate will apply to those companies that aren't represented by corrupted politicians.

[AskandThink]

03:39 PM on 04/02/2012

How about a flat tax rate and a REAL unemployment rate…?
(*gasp!* Went too far again..?)