September 22, 2012
2012 Corporate Tax Competitiveness Rankings
Corporate income tax reform is receiving serious consideration in Washington. The Obama administration has suggested reducing the federal corporate tax rate from 35% to 28% while broadening the tax base. Presidential candidate Mitt Romney has said that he would cut the corporate tax rate to 25% if elected. ...
This bulletin presents new estimates of marginal effective tax rates (METRs) on corporate investment for 90 countries. We find that the U.S. effective tax rate on new corporate investment is 35.6% in 2012, which is almost twice the average rate for the 90 countries studied, and it is also the highest rate among the major industrial nations. These results underscore the need for U.S. policymakers to tackle corporate tax reform.
Effective Tax Rates for 2012 Figure 1 summarizes our corporate tax rate calculations. The U.S. METR is 35.6% in 2012, or almost twice the 90-country average of 18.2%. The average rate for the 34 Organization for Economic Cooperation and Development (OECD) nations is just 19.4%. While the U.S. corporate tax rate has remained high, the global trend for both statutory and effective corporate tax rates has been downward.
Table 1 on the next page shows METR calculations for 90 countries, including separate figures for the services and manufacturing sectors. The United States has the fourth highest effective tax rate on corporate investment in the world after Argentina, Chad, and Uzbekistan.
The United States has a high METR, a high statutory tax rate, and numerous special preferences in its corporate tax system. This noncompetitive and nonneutral tax structure is harmful to growth, and it results in relatively low government revenues because the high rates induce businesses to shift their investments and profits abroad.
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