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Republicans and teahadists are fond of proclaiming that the United States has the highest corporate tax rate in the world. Of course this is not true. While the US has a graduated corporate income tax rate starting at 0% and rising to 35%, many other countries have corporate rates of 35% or higher. Japan, for example, has a corporate tax rate of 40.69% and unlike the US rates, Japan's is not even graduated.

The real question, though, is how much is a nation's effective tax rate for corporations? An effective tax rate is the actual rate that companies pay after credits and other subtractions from the book rate (up to 35% in the case of the US) that would otherwise be paid.

Another way of looking at taxes is by assessing how much of the nation's total tax burden is paid by each group that pays taxes. CNN has an interesting chart in an otherwise poorly reasoned article that shows just how much US corporations paid in federal taxes during the first half of fiscal year 2011. Calculated as a percentage, the answer is not much. US corporations paid only 5.3% of all taxes collected in those 6 months.

Here is the link to the article and chart: Federal Revenue Sources: 6 Month Snapshot

So the next time you hear a winger claiming that American corporations are paying the highest corporate tax rate in the world, simply point out that the actual amount corporations pay is barely over 5%. Then, contrast that with corporate tax payments of more than 30% of Federal revenues in the 1950s, a time universally acknowledged as excellent for both workers and corporations. Makes you wonder if lower corporate tax rates are such a good idea after all.

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Comment Preferences

  •  Tip Jar (13+ / 0-)

    Republicans: Infinite compassion for the rich. Infinite contempt for the poor.

    by edg on Tue Apr 12, 2011 at 01:31:52 PM PDT

    •  You kinda dodge the question (3+ / 0-)
      Recommended by:
      nextstep, 1918, VClib

      What's the effective corporate tax rate in the US compared to other countries?

      Personally, I find their claim kind of hard to believe, given than many oil companies pay exorbitant corporate taxes overseas...

      ...but the mere fact corporate taxes are a smallish part of federal income doesn't answer the question one way or another.

    •  The Corporate Tax rate also includes (2+ / 0-)
      Recommended by:
      1918, VClib

      State Income taxes not just the Federal rate.

      In California the max state income tax rates are 8.84% for non financial C corporations and 10.84% for Financial C corporations which is paid in addition to the Federal 35% rate (and the State tax due is a deductible expense)

      This places the combined Federal and California Corporate tax rates above the Japan rate.

      The most important way to protect the environment is not to have more than one child.

      by nextstep on Tue Apr 12, 2011 at 03:02:45 PM PDT

      [ Parent ]

    •  Here is what actually happens. (2+ / 0-)
      Recommended by:
      Onomastic, VClib

      Some industries get generous tax breaks while others wind-up paying the full freight.  This is why there are thousands of pages to the tax code and why the tax committees are the most desirable in the House and Senate and why business lobbyists are so important.

      Those businesses that are heavily favored, put significant operations in the US and pay little in income taxes.  For many businesses that don't get special tax preferences, they minimize their operations in the US (i.e., minimize jobs in the US) and maximize their operations outside the US so profits are recognized outside the US where the tax rates are lower - so they pay little US taxes as well.  This is done by companies headquartered outside the US as well as those heavyhearted in the US.

      Non-competitive corporate tax rates in the US is not really a problem for many business, as they just locate operations and jobs outside the US so the profits are made outside the US.

      This is however a major problem for US workers from the resulting higher unemployment and lower pay.

      The most important way to protect the environment is not to have more than one child.

      by nextstep on Tue Apr 12, 2011 at 03:19:22 PM PDT

      [ Parent ]

  •  Not many. Just Japan. (3+ / 0-)
    Recommended by:
    nextstep, 1918, VClib
    many other countries have corporate rates of 35% or higher.

    Japan's the only OECD country w/ a higher marginal rate, and they're dropping theirs to around 35%.
  •  The truth is.. (2+ / 0-)
    Recommended by:
    Sychotic1, litho
    What US companies actually pay in taxes is among the lowest figures in the developed world. The effective tax rate is what companies actually fork over. As the non-partisan Center for Budget and Policy Priorities (CBPP) explained, the 35 percent rate the corporate mouthpieces on CNBC are always whining about “does not take into account the generous depreciation rules, exemptions, deductions, and credits (some of which are sometimes termed 'loopholes') that corporations may be eligible for.”
    Take all of this together, and the U.S. ranked 28th out of 30 countries in the Organization for Economic Cooperation and Development (OECD) (which includes most of the world’s leading economies) in terms of the share of the economy corporations pay in income taxes. At 1.8 percent, our government actually collects around half of the OECD average (PDF).

    Be the change you want to see in the world. -Gandhi

    by DRo on Tue Apr 12, 2011 at 01:56:26 PM PDT

  •  Go check out Germany. Economic powerhouse (1+ / 0-)
    Recommended by:

    and iirc, high tax rates.

  •  Which is why we should propose (3+ / 0-)
    Recommended by:
    nils o, nextstep, VClib

    to lower the rate but get rid of many of the deductions because while large corporations can afford to pay accountants millions to make sure they pay very little who really gets hurt by our high nominal coprorate rate is small businesses.  Drop it down to 28-29% (Germany's is 29% on average) but cut out the deductions.  

    I really believe complexity in our tax system is the number one factor in how regressive it is.  Reduce complexity and you will have a more progressive code

  •  tricky taxes (0+ / 0-)

    While some nations do have lower 'corporate' tax rates these days, they also have much higher personal income tax rates, with the highest earners paying over 50% in some cases.

    Interesting article here:Corp Tax rates fall in Europe

    Across the board, EU states charged an average of 37.5 percent in income tax last year, up slightly from the 37.1 percent they charged in 2009,

    They love to only tell half the story, those silly GoPs.

    Thanks for the diary and for keepin' 'em honest.

    “The most important trip you may take in life is meeting people halfway” ~ Henry Boye~

    by Terranova0 on Tue Apr 12, 2011 at 06:25:58 PM PDT

  •  edg - apples and oranges (0+ / 0-)

    You write two paragraphs about marginal and the effective corporate rates but then don't tell us what the effective rate is and how it compares to other developed countries. Then the punch line is the share of revenues provided by the corporate income tax and then suggest that somehow the RATE at which corporations pay tax and the SHARE of total tax revenues are somehow the same, which is total nonsense. You had a good point to make but confused two separate metrics. And anyone who thinks that our top statutory rate is not a part of why corporations are moving offshore is not living in the real world.

    "let's talk about that"

    by VClib on Tue Apr 12, 2011 at 07:49:38 PM PDT

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