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Are U.S. Corporate Taxes Too High?

Blogging at the Tax Foundation’s tax policy blog, Scott Hodge, the Foundation’s president, writes about a “blockbuster study” from economists at the Organization for Economic Co-operation and Development (OECD) that:

“studied the effects of various types of taxes on the economic growth of developed nations within the OECD and found that ‘corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes.’”

The OECD “is an international organisation of thirty countries that accept the principles of representative democracy and free-market economy. It originated in 1948 . . . to help administer the Marshall Plan,” according to Wikipedia. Hodge goes on to write:

“The main recommendation of the study is that if countries want to enhance their economic growth they would do well to move away from income taxes - especially corporate income taxes - toward less distortive taxes such as consumption-based taxes. The key to creating a growth-oriented corporate income tax system is to impose a reasonably low tax rate with few exemptions.

“The study is particularly timely in light of the new OECD rankings of corporate taxes among the 30 OECD nations. It shows that the U.S. continues to have the 2nd highest overall corporate tax rate among industrialized countries. Only Japan has a higher overall rate.

“Worst of all, since nine countries cut their corporate tax rates this year, the overall OECD average fell by a full percentage point, from 27.6 percent to 26.6 percent. This means that the U.S. rate is now 50 percent higher than the OECD average. This should be a wake up call to Washington that our long-term economic health is in jeopardy as long as corporate rates remain so far out of step with our major economic competitors.”

Table 1 in the Tax Foundation’s review of the OECD (Fiscal Fact No. 136) compares the combined corporate income tax rates for 2007 and 2008. In addition, the following chart is from the the Tax Foundation’s review:

HT Carpe Diem  


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