Question

How do corporate tax rates in the United States compare to those of other countries around the world? Have rates in the United States changed? Should this be a concern for the U. S. economy? Does this have any impact on the ability of U. S. companies to compete globally? What does double taxation of corporate income mean? Could corporate income ever be subject to triple taxation? response should contain at least 100 words

Answer 1

How do corporate tax rates in the United States compare to those of other countries around the world?

Key Findings

• In general, large industrialized nations tend to have higher statutory corporate income tax rates than developing countries.
• The worldwide average statutory corporate income tax rate, measured across 208 jurisdictions, is 23.03 percent. When weighted by GDP, the average statutory rate is 26.47 percent.
• The average top corporate rate among EU countries is 21.68 percent, 23.69 percent in OECD countries, and 27.63 percent in the G7.
• Europe has the lowest regional average rate, at 18.38 percent (25.43 percent when weighted by GDP). Conversely, Africa has the highest regional average statutory rate, at 28.81 percent (28.39 percent weighted by GDP).
• The worldwide average statutory corporate tax rate has consistently decreased since 1980, with the largest decline occurring in the early 2000s.
• The average statutory corporate tax rate has declined in every region since 1980.

The majority of the 208 separate jurisdictions surveyed have corporate tax rates below 25 percent and 103 have tax rates between 20 and 30 percent. The average tax rate among these jurisdictions is 23.03 percent,[3] or 26.47 percent weighted by GDP. The United States has the 83^rd highest corporate tax rate with a combined statutory rate of 25.84 percent.

The twenty countries with the highest statutory corporate income tax rates span every region, albeit unequally. While nine of the top twenty countries are in Africa, Europe and Asia appear in the top twenty only twice each. Of the remaining jurisdictions, one is in Oceania, and six are in the Americas.

The only other countries with large economies in the top twenty are India (35 percent), France (34.43 percent) and Brazil (34 percent). India holds the ninth spot, while France holds the 16^th, and Brazil holds the 17^th.

Have rates in the United States changed?

The Tax Cuts and Jobs Act (TCJA) reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent. However, corporations operating in the United States face another layer of corporate income tax levied by states. As such, the statutory corporate income tax rate in the United States, including an average of state corporate income taxes, is 25.7 percent. This rate puts the United States in line with the average among Organisation for Economic Co-operation and Development (OECD) member nations.

In addition to the 21 percent federal corporate income tax rate, 44 of the 50 U.S. states levy corporate income taxes. State corporate tax rates range from 3 percent in North Carolina to 12 percent in Iowa. The average state corporate income tax rate (weighted by population) is 6 percent.

Should this be a concern for the U. S. economy?

“The high corporate income tax rate puts the U.S. at a competitive disadvantage versus lower-taxed nations like Ireland and Canada in the effort to attract new corporate investment and jobs,” says John Boyd, Jr., principal of The Boyd Company.

One result is the relocation of U.S. corporations to foreign countries with more favorable tax laws. When these companies move their headquarters or create foreign subsidiaries, jobs and profits move overseas. The number of U.S. jobs at major multinational corporations shrunk during the last decade by 2.9 million, even more than the 2.4 million jobs these companies created abroad. In 2009, about one-third of all these companies’ workers were located abroad. And U.S. companies were holding $1.95 trillion in foreign countries in 2013, according to calculations by Bloomberg News. When you can choose where to do business, it makes sense to choose the lowest-cost option, and many corporations do.

• It Consumes Enormous Resources
• It Discourages Saving and Investment

What does double taxation of corporate income mean?

Double taxation is a term used to describe the way taxes are imposed on corporate shareholders and on corporations. The corporation is taxed on its earnings (profits), and the shareholders are taxed again on the dividends they receive from those earnings.

Another description of double taxation applies to shareholders who are also employees and owners of the corporation:

• The "owner" of the corporation receives a salary as an employee. This salary is taxed at the regular personal income tax rate.
• In addition, the owner is also a shareholder. If the corporation pays dividends on the profits of the corporation, the owner must pay the tax on those dividends on his/her personal tax return.

Could corporate income ever be subject to triple taxation?

Income could even be subject to triple taxation. Triple taxation occurs when (1) the original corporation is first taxed, (2) the second corporation is then taxed on the dividends it received, and (3) the individuals who receive the final dividends are taxed again.