We're (going to be) No. 1! Alas
Warranting attention is today's lead editorial in The Wall Street Journal, "The U.S. Is Number One: On April 1, Japan cedes the highest corporate tax rate to America."
April 1 is a date that every politician and business executive in America should circle on the calendar. That's when Japan cuts its corporate tax rate to 36.8% from 39.5%. The United States will then hold the title of highest corporate tax rate, with average combined federal and state profit levies of 39.2%.
Yes, that's higher than Sweden. Higher than Russia. And China, Mexico, Denmark and even France. Doesn't it make you want to break out in a chant: U-S-A, U-S-A?
Tokyo's move is striking because its political class has long behaved as if tax rates don't matter, and the government is wrestling with the need to finance a typically large budget deficit and an aging population. But in 2010 politicians had a radical idea: Cutting the corporate profits tax would boost economic activity and lead to higher revenues.
Invariably when BRT makes the point that the high U.S. corporate tax rates are anti-competitive, discouraging growth and domestic investment, critics respond, "What about the effective rate? What with all the loopholes, exemptions, incentives and tax dodges, U.S.-based corporations never pay the statutory tax rate."
Effective rate? From page 17 of Business Roundtable's "Taking Action for America: A CEO Plan for Jobs and Economic Growth":
Although not as widely noted as the high statutory corporate tax rate, the United States also has a high effective tax rate on corporate income. A study of financial statement effective tax rates for the 2,000 largest companies in the world found that U.S.-headquartered companies faced a higher worldwide effective tax rate than their counterparts headquartered in 53 of 58 countries over the 2006-2009 period.
Then there's the fact that the United States still operates under a worldwide tax system, which discourages U.S.-based companies from bringing their overseas earnings back home.
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In 2016, Business Roundtable will focus its efforts on greater job expansion and economic growth – national priorities that are inextricably linked. Informing our plan is our collective business experience as CEOs of America’s leading companies, experience that tells us what it takes to build momentum for the United States in in 2016 and beyond.