A new study by the Organization for Economic Cooperation and Development has
shown that the United States is effectively moving backwards in terms of corporate
tax competitiveness with its continued failure to lower rates.
The OECD study shows that for the 17th consecutive year, the average rate of
corporate taxes in non-US countries fell while the US corporate tax rate
stayed the same.
As a result of the US failure to lower its corporate tax rate for more than
two decades while other major trading nations lowered theirs, the US corporate
tax rate is now 50% higher than the OECD average. Nine key trading partners
cut their rates during 2007.
"Continued failure by US tax policymakers to keep up with our top global
economic competitors means that we're solidifying a trend that will result in
our children and grandchildren not seeing the economic growth we've seen in
our lifetimes," stated Scott Hodge, President of the Tax Foundation in
the organization's latest Fiscal Fact, released on Wednesday in response to
the OECD report.
"There's a real-wallet impact for Americans as we continue to sit idly
by while other countries improve the way they do business, and we should be
very concerned about jobs, capital, and investments moving from high-tax countries
to low-tax countries," Hodge warned.
According to the Tax Foundation, the latest report comes on the heels of another
recent OECD study showing that corporate taxes are the single most harmful tax
to GDP growth, more so than personal income taxes or consumption taxes.
The combined federal and state corporate tax rate in the US currently stands
at 39.3% - the second-highest among industrialized countries - while the OECD
average rate has fallen to 26.6%.
Even China has recognized the significance of cutting the corporate tax to
become more competitive, reducing their top standard corporate tax rate from
33% to 25% just this year, the Tax Foundation noted.
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