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Monday, March 24, 2008

U.S. States Lead the World in High Corporate Tax Rates

The Tax Foundation has released U.S. States Lead the World in High Corporate Taxes:

Many states impose state corporate income taxes at rates above the national average of 6.6%. Iowa, for example, imposes the highest corporate tax rate of 12%, followed by Pennsylvania's 9.99% rate and Minnesota's 9.8% rate. When added to the federal rate, these states tax their businesses at rates far in excess of all other OECD countries. When compared to other OECD countries ... 24 U.S. states have a combined corporate tax rate higher than top-ranked Japan.

See below the fold for a table with the combined federal and state corporate tax rates for the fifty states and the thirty OECD countries:

Oecd_overall_rank_page_1_3

Oecd_overall_rank_page_2 

http://taxprof.typepad.com/taxprof_blog/2008/03/us-states-lead.html

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» IOWA: FIRST IN THE NATION WORLD from Roth & Company, P.C.
It's not just caucuses. Iowa is first in the nation in corporate tax rates. From a new Tax Foundation study:... [Read More]

Tracked on Mar 24, 2008 8:42:11 AM

» Iowa, other US states lead world in high corporate taxes from Wizbang
Nearly half of US states, including most of the most populous states, have combined state/federal corporate tax rates higher than even Japan (the country with the overall highest national rate),... [Read More]

Tracked on Mar 24, 2008 4:28:01 PM

Comments

Comparing rates doesn't provide much useful information (unless you are running for office and want to promise tax breaks for your contributors).

I wish the Tax Foundation (and less ideological organizations) would devote themselves to telling us how much corporations actually pay after deductions, exclusions, credits, etc. -- U.S. corporations are doing just fine when you look at their actual tax expenses.

Posted by: Joe | Mar 24, 2008 1:04:28 PM

Hmmm. Anything in there about VAT in Europe?

Posted by: Jeff | Mar 24, 2008 2:05:00 PM

Joe says: "I wish the Tax Foundation (and less ideological organizations) would devote themselves to telling us how much corporations actually pay after deductions, exclusions, credits, etc. -- U.S. corporations are doing just fine when you look at their actual tax expenses."

That's a really lousy way to look at it. I'd much rather have a 30% flat rate than a 40% nominal rate that MIGHT get down to 28% if my lawyer and accountant are really smart and aggressive. At least half the problem with our tax system is due to the Byzantine deductions, exclusions, credits and other forms of rent-seeking and pork-barreling that foul our tax code.

I want a flat rate with no special favors for politically-connected industries or companies. I want power taken out of the hands of politicians and lobbyists. I want armies of cream-skimming lawyers and accountants now engaged in gaming the system to find useful, productive, honest work, or go out of business. By God, we'll get it some day, too. If they can do it in Eastern Europe, we can do it here.

Posted by: Shadow Merchant | Mar 24, 2008 2:13:18 PM

BS Joe. Rates tell you plenty. The Laffer Curve really does exist whether you know it or not. Look at what has happened in Singapore and Ireland for real world examples. And if you think US corporations are doing just fine, then you'd better think again. Let's just take our auto industry for one specific case. Foreign competition has hurt it mightily, and when it doesn't make financial sense to operate in the US, big companies move offshore or outsource. A rational person would think that if business paid less in taxes it would enable corporations to a) pay workers more b) invest in capital improvements which improve productivity and quality. Oh, yeah, and it also enables them to pay investors more - which what you probably are having the hissy fit about. Of course I'd never accuse you of being rational given your obvious bias. Sure executive decision-making and plenty of other factors have roles to play, but ceteris paribus, what I've stated above is true.

Posted by: RKV | Mar 24, 2008 2:15:40 PM

"I wish the Tax Foundation would devote themselves to telling us how much corporations actually pay..."

Viola! And more usefully, here.

As for "deductions, exclusions, credits, etc," you'd better believe it. How would you propose they continue operating when four-tenths of their income is deleted before they even address their real-world logistical expenses?

The culture in this country of demanding industries pay for other people's medicine and farm insurance and then reacting with outrage to accounting scandals and worsening job compensation is unreal.

Posted by: hitnrun | Mar 24, 2008 2:40:45 PM

I found it interesting that Ohio had gone so far down on the list.

Posted by: Fat Man | Mar 24, 2008 2:59:41 PM

Joe,

How right you are. Which probably explains why we sell more to China than we buy from them.

Posted by: M. Simon | Mar 24, 2008 3:04:52 PM

As for the Tax Foundation, figures lie and liers figure.

Posted by: Gorgonzola | Mar 24, 2008 4:07:11 PM

Then why is the economy so bad in the states with the lower tax rates? Excluding Texas, I imagine, but speaking as a Missourian, our economy sucks. It's a struggle to get new companies to come here, or stay here.

Posted by: JeremyR | Mar 24, 2008 4:18:02 PM

At least Texas and Nevada are still competitive. I am fine with all US business migrating out of the Northeast and into Texas.

But the next President better cut the rate to 30%, and soon. It will solve almost all of our current economic problems :

1) Jobs - this will create jobs.
2) Inflation - Corporations pass tax costs onto consumers, to a decrease in tax rates will be passed on in the form of lower product costs.
3) Tax Revenue - lower taxes will reduce the number of corporations are are incorporating in Ireland and Bermuda, and keep them in the US.

Posted by: GK | Mar 24, 2008 4:32:16 PM

re: Gorgonzola...........unions?

Posted by: Jerry | Mar 24, 2008 4:44:06 PM

As for the Tax Foundation, they are straight shooters, and those cheeseheads who resort to trite sayings have no idea of their long history and sterling work.

Posted by: RKV | Mar 24, 2008 5:10:05 PM

Old Data. Canada's rate is dropping at both Federal and most provinces (eg 10% provincial, 15% federal). It might be more work, but a corporation is interested in future tax rates as opposed to historical ones.

More relevant would be the rate from the aggregate corporate taxes paid divided by aggregate corporate revenues, as in

Sum of all corporate taxes divided by the GDP


As for America, there are countless tax credits handed out that are part of no standard formula.

If you are trying to highlight starting new businesses, then why not look at the tax rates applied to small companies as they usually have a package of tax rates and credits that apply because of their size.

Furthermore if you are interested in attracting businesses, who are in turn interested in attracting employees, then the tax revenue distribution is also relevant. Europe pays high gasoline taxes, but after removing those taxes some like France pay less for gasoline -- that money is money that no longer needs to be taxed at the personal or corporate income level.

Posted by: Name | Mar 24, 2008 5:59:50 PM

GK said: "But the next President better cut the rate to 30%, and soon. It will solve almost all of our current economic problems..."

Unfortunately, all three of the pending candidates for president seem to think that business is the problem, and they have punitive plans to make business pay for all the trouble they cause us. What Hillary would do to oil companies, McCain would do to pharmaceutical companies. Pelosi and Reid will eagerly follow their lead. Government, in their minds, is the solution. Fee fi fo fum, I smell disaster from thinking so dumb.

Posted by: pa | Mar 24, 2008 6:07:42 PM

Is this that "Corporate Welfare" thing I hear so much about?

Posted by: DirtCrashr | Mar 24, 2008 7:08:37 PM

More evidence that it's basically illegal to be in biz or earn money.

Interesting that Iowa is top. Is this rate coupled to the drunken drive so many have for moving corn from our plates to our tanks?

Posted by: djr | Mar 24, 2008 9:10:43 PM

Well if the big bad corporations pay so little tax in all those countries, how do they get free socialist healthcare? Where does that money come from?

Don't tell me that it comes out of use taxes, VAT and income tax paid by individuals!

Who ever woulda thunkit?

Posted by: Dr. Kenneth Noisewater | Mar 24, 2008 9:28:06 PM

"Well if the big bad corporations pay so little tax in all those countries, how do they get free socialist healthcare? Where does that money come from?"

Because the US pays the military budget for the western world.

Posted by: Sean | Mar 25, 2008 5:33:04 AM

I believe the Tax Foundation believes what it says are the facts. I think they have the facts correct, but I also believe that there are many more factors that go into the decision to move to another country. The Tax Foundation believes that the tax rates of each country are a factor that is somewhat stable in the current business environment, at least for comparison purposes. I am not so sure that is completely true. I believe that it is a convenient way of comparing situations simply so executives can give an 'easy' explanation to their audience (staff, workers, media, government, investors and regulators). Moving a business is very close to any kind of move from one place to another. It is a big pain in every way. No one wants to do it and you have to have some very good reasons to go through with it. Taxes are only one of them and I don't believe that is any more important than several others that have to be major considerations for any company big or small. Location (not just the tax rates of the country) but the actual place where you land in that country. Weather, health care, laws/legal code, transportation, staff availability, utilities, stability and language are just a few of the most important considerations that HAVE to be taken into account no matter what the tax rates are. Ireland certainly became very attractive when they lowered the tax rate to 12.5 % because it has a favorable account of many of the other issues to be considered. I don't blame the Tax Foundation for espousing this perspective, they don't have the capability to delve into a multi-faceted issue like this with any sort of comprehensiveness and the fact is that they are focused only on the tax issues. It is OUR (the readers, investors and businesspeople who read as much of the information available to us) responsibility to find ALL of the information we need to make an informed decision about the issue before us. Good Luck!

Posted by: Barry Benjamin | Sep 1, 2008 9:00:45 PM

Looks like Joe ought to go back to plumbing. Let's role the tape: "U.S. corporations are doing just fine when you look at their actual tax expenses." Unfortunately, that's not the point. The point is when new or expanded investments are analyzed for location, the actual, as opposed to published, tax rates are unknown. Thus, on the margin, location decisions may often lead to investment outside the jurisdiction of U.S. tax authorities. Thus, Shadow Merchant hits the nail on the head. A transparent, uniform tax rate, established so as to be competitive with prevailing international tax rates, is a logical response, among others.

Posted by: JohnSal | Jan 19, 2009 3:05:03 PM