TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, September 16, 2014

U.S. Ranks 32nd (out of 34 OECD Countries) in International Tax Competitiveness

Tax Foundation, 2014 International Tax Competitiveness Index:

Tax Foundation logoThe Tax Foundation’s International Tax Competitiveness Index (ITCI) measures the degree to which the 34 OECD countries’ tax systems promote competitiveness through low tax burdens on business investment and neutrality through a well-structured tax code. The ITCI considers more than forty variables across five categories: Corporate Taxes, Consumption Taxes, Property Taxes, Individual Taxes, and International Tax Rules. The ITCI attempts to display not only which countries provide the best tax environment for investment but also the best tax environment to start and grow a business.

Tax Foundation

Wall Street Journal editorial, We're Number 32! A New Global Index Highlights the Harm From the U.S. Tax Code.:

According to the foundation, the new index measures "the extent to which a country's tax system adheres to two important principles of tax policy: competitiveness and neutrality."

A competitive tax code is one that limits the taxation of businesses and investment. Since capital is mobile and businesses can choose where to invest, tax rates that are too high "drive investment elsewhere, leading to slower economic growth," as the Tax Foundation puts it.

By neutrality the foundation means "a tax code that seeks to raise the most revenue with the fewest economic distortions. This means that it doesn't favor consumption over saving, as happens with capital gains and dividends taxes, estate taxes, and high progressive income taxes. This also means no targeted tax breaks for businesses for specific business activities." Crony capitalism that rewards the likes of green energy with lower tax bills while imposing higher bills on other firms is political arbitrage that misallocates capital and reduces economic growth.

The index takes into account more than 40 tax policy variables. And the inaugural ranking puts the U.S. at 32nd out of 34 industrialized countries in the Organization for Economic Co-operation and Development (OECD). ...

Rather than erecting an iron tax curtain that keeps U.S. companies from escaping, the White House and Congress should enact reform that invites more businesses to stay or move to the U.S.

https://taxprof.typepad.com/taxprof_blog/2014/09/us-ranks-32nd.html

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Comments

This is propaganda and not scholarship.

Posted by: mike livingston | Sep 16, 2014 2:13:12 AM

Sorry, Mike Livingston- this is Reality. Progressive economic Pollyanna-ism cannot put clothes on the emperor.

Posted by: john sector | Sep 16, 2014 7:17:26 AM

Estonia - was that not sunk in WW Deux? - give me a break - non-entities should not be counted - I got the GNP of Estonia in my pocket.

Posted by: Lokis | Sep 16, 2014 8:18:40 AM

Livingston's unsupported claim is not scholarly but easily propagated.

Posted by: RM Ramallo | Sep 16, 2014 9:16:59 AM

Solid argument, Mike.

You should take that straight to the GC offices of any corporation that has moved, or is contemplating a move, and explain that because this article is propaganda, they should not consider any underlying data supporting the claims. I’m sure those people would assume your perspective, and their concerns about the IRS’s scheme of taxation would be immediately quashed.

Posted by: anon | Sep 16, 2014 11:26:57 AM

Source: The Tax Foundation. 'Nuff said.

Posted by: Publius Novus | Sep 17, 2014 7:47:57 AM

What's interesting is that there are several countries above the U.S. in these rankings that have much broader and larger social safety nets than the U.S. (Canada, UK, Switzerland). This undercuts the argument that U.S. companies are seeking relocation solely to “tax havens.” The lack of a social safety net and the depletion of local funding seems to be the source of constituencies push for higher taxes. It seems that it’s not a tax revenue issue, but a miss-allocation of spending that drives the push for higher taxes in the U.S. I would speculate that you couldn't reduce rates without some reallocation of revenue in order to mitigate public backlash.

Posted by: JBF | Sep 17, 2014 11:08:22 AM