Sunday, January 16, 2011
Illinois Corporate Tax Hike Inches U.S. Closer to #1 Global Tax Ranking
Tax Foundation, Illinois Corporate Tax Hike Inches U.S. Closer to #1 Ranking Globally:
The recent move by Illinois lawmakers to increase the state's corporate tax rate from 7.3% to 9.5% is further evidence that no tax change is made in a vacuum. Not only did the rate hike move Illinois from having the 21st highest overall corporate tax rate among the 50 states to having the 3rd highest, it also raised the average corporate tax rate for the nation as a whole, thus inching the U.S. closer to Japan as having the highest corporate tax rate among the leading industrialized nations.
When state lawmakers think about how their state compares, they tend to think only about their standing relative to their direct neighbors or the other 49 states. However, they need to also recognize that they are competing in a global economy and that their state corporate taxes are being levied in addition to the federal corporate tax rate of 35%. Because the U.S. federal rate is the highest federally imposed corporate tax rate among the 31 nations comprising the Organization for Economic Cooperation and Development (OECD), most states are effectively imposing some of the highest corporate tax rates in the world.
Comparing U.S. State Corporate Taxes to the OECD (2011) |
||||
OECD Rank |
Country/State |
Fed. Rate 2010 |
Top State/Provincial Corporate Tax Rate |
Combined Fed. & State Rate |
|
Pennsylvania |
35 |
9.99 |
41.5 |
|
Minnesota |
35 |
9.8 |
41.4 |
|
Illinois |
35 |
9.5 |
41.2 |
|
Alaska |
35 |
9.4 |
41.1 |
|
New Jersey |
35 |
9.36 |
41.1 |
|
Rhode Island |
35 |
9 |
40.9 |
|
Maine |
35 |
8.93 |
40.8 |
|
California |
35 |
8.84 |
40.7 |
|
Delaware |
35 |
8.7 |
40.7 |
|
West Virginia |
35 |
8.7 |
40.7 |
|
Massachusetts |
35 |
8.5 |
40.5 |
|
Indiana |
35 |
8.5 |
40.5 |
|
New Hampshire |
35 |
8.5 |
40.5 |
|
Vermont |
35 |
8.5 |
40.5 |
|
Maryland |
35 |
8.25 |
40.4 |
|
Oregon |
35 |
7.9 |
40.1 |
|
Wisconsin |
35 |
7.9 |
40.1 |
|
Nebraska |
35 |
7.81 |
40.1 |
|
Idaho |
35 |
7.6 |
39.9 |
|
New Mexico |
35 |
7.6 |
39.9 |
|
Connecticut |
35 |
7.5 |
39.9 |
|
New York |
35 |
7.1 |
39.6 |
|
Kansas |
35 |
7.05 |
39.6 |
1 (2) |
Japan (2010 Rates) |
30 |
11.51 |
39.54 |
|
Arizona |
35 |
6.97 |
39.5 |
|
North Carolina |
35 |
6.9 |
39.5 |
|
Montana |
35 |
6.75 |
39.4 |
2 (1) |
United States |
35 |
6.56 |
39.3 |
|
Alabama |
35 |
6.5 |
39.2 |
|
Arkansas |
35 |
6.5 |
39.2 |
|
Tennessee |
35 |
6.5 |
39.2 |
|
Hawaii |
35 |
6.4 |
39.2 |
|
North Dakota |
35 |
6.4 |
39.2 |
|
Missouri |
35 |
6.25 |
39.1 |
|
Georgia |
35 |
6 |
38.9 |
|
Kentucky |
35 |
6 |
38.9 |
|
Oklahoma |
35 |
6 |
38.9 |
|
Virginia |
35 |
6 |
38.9 |
|
Iowa |
35 |
12 |
38.6 |
|
Florida |
35 |
5.5 |
38.6 |
|
Mississippi |
35 |
5 |
38.3 |
|
South Carolina |
35 |
5 |
38.3 |
|
Utah |
35 |
5 |
38.3 |
|
Michigan |
35 |
4.95 |
38.2 |
|
Colorado |
35 |
4.63 |
38.0 |
|
Louisiana |
35 |
8 |
37.4 |
|
*Texas |
35 |
0 |
35.0 |
|
*Washington |
35 |
0 |
35.0 |
|
*Ohio |
35 |
0 |
35.0 |
|
Nevada |
35 |
0 |
35.0 |
|
South Dakota |
35 |
0 |
35.0 |
|
Wyoming |
35 |
0 |
35.0 |
2 |
Japan (2011 Rates) |
30 |
11.51 |
34.54 |
3 |
France |
34.43 |
|
34.4 |
4 |
Belgium |
33.99 |
|
33.99 |
5 |
Germany |
15.83 |
14.4 |
30.18 |
6 |
New Zealand |
30 |
|
30 |
7 |
Spain |
30 |
|
30 |
8 |
Australia |
30 |
|
30 |
9 |
Mexico |
30 |
|
30 |
10 |
Luxembourg |
21.84 |
6.75 |
28.59 |
11 |
Canada |
16.5 |
11.5 |
28 |
12 |
United Kingdom |
28 |
|
28 |
13 |
Norway |
28 |
|
28 |
14 |
Italy |
27.5 |
|
27.5 |
15 |
Portugal |
25 |
1.5 |
26.5 |
16 |
Sweden |
26.3 |
|
26.3 |
17 |
Finland |
26 |
|
26 |
18 |
Netherlands |
25.5 |
|
25.5 |
19 |
Austria |
25 |
|
25 |
20 |
Denmark |
25 |
|
25 |
21 |
Korea |
22 |
2.2 |
24.2 |
22 |
Greece |
24 |
|
24 |
23 |
Switzerland |
8.50 |
14.47 |
21.17 |
24 |
Turkey |
20 |
|
20 |
25 |
Czech Republic |
19 |
|
19 |
26 |
Hungary |
19 |
|
19 |
27 |
Poland |
19 |
|
19 |
28 |
Slovak Republic |
19 |
|
19 |
29 |
Chile |
17 |
|
17 |
30 |
Iceland |
15 |
|
15 |
31 |
Ireland |
12.5 |
|
12.5 |
https://taxprof.typepad.com/taxprof_blog/2011/01/illinois-corporate-tax-hike.html
Comments
Just finishing a trip to Australia and New Zealand, where they have confiscatory VAT taxes called "GST" or "Goods and Service Tax". In NZ it is 15%, and I thing AU is 11%. Of course, most US states have sales taxes of about 6%, too. Still, the TOTAL tax liability must be considered....
Posted by: Dennis Xander | Jan 16, 2011 5:11:10 PM
As a prior post indicated, comparing statutory rates rather than effective rates is sophomoric. Worse, it should be the province of inflammatory radio talk shows rather than a respected think tank.
The Tax Foundation should know better. Taxes as a percentage of GDP is the relevant and meaningful comparison. Compared to the other 33 OECD nations, the United States ranked FIFTH FROM THE BOTTOM with respect to corporate taxes as a percentage of GDP.
For a summary of the 2010 data, see http://ctj.org/ctjreports/2010/11/united_states_remains_one_of_the_least_taxed_industrial_countries.php.
Posted by: Dennis Ventry | Jan 16, 2011 12:34:37 PM
Seems like the Tax Foundation is pushing an agenda rather than publishing relevant and valid research....
Posted by: jjohnson@jjohnstontaxlaw.com | Jan 16, 2011 8:54:56 AM
The Tax rate of 35% is misleading. How many corporations actually pay the 35%.
Large depreciation expenses lower rates, so many corps don't pay for years
upon years.
Posted by: Jack Walsh | Jan 16, 2011 8:09:04 AM
This type of study needs to focus on Effective and not Statutory tax rates. For example, the provision in the 2010 Tax Legislation to allow one year expensing of cap ex reduced the effective corporate tax in the U. S. for 2011 (and raised it for future years if the provision is not extended) but did not affect the statutory rates. I do not know if the rankings would change, but effective rates are certainly more important and more relevant information.
Posted by: Sid | Jan 16, 2011 6:41:55 AM
While I agree that there are problems with the Tax Foundation's measure, Dennis, you should know better than to use corporate tax collections as a % of GDP because the U.S. has a tax code whereby a large fraction of business income is taxed in the individual tax code. Your comparison metric is no better than the Tax Foundation's.
Posted by: Milton | Jan 17, 2011 5:44:51 AM