Do U.S. Companies Pay Higher Taxes Than Competitors Around the World?

When faced with the choice of taxing companies more or raising the taxes of individuals, most people would probably choose to tax corporations. After all, they’re the ones with all the money, right?

While it’s natural to want to pass the buck to anyone other than ourselves, the problem is that raising income taxes on corporations may serve to lower your personal taxes in an untended and unpleasant way: by getting you laid off.

The world economy is increasingly global. While not all companies directly compete with others around the world, many do. If the company you work for pays less income taxes than a similar company in another country, it’s more profitable and therefore more likely to expand and hire workers, rather than lay them off. So while you may not wish higher taxes on yourself, wishing them on corporations isn’t a great idea either.

With that in mind, here’s a look at some corporate taxes around the world, according to the Tax Foundation. Per this article, the United States has the highest corporate tax rates among the 34 member countries in the Organization for Economic Cooperation and Development (OECD). Here are the top 15…

  1. United States: 35 percent
  2. Japan: 34.54 percent
  3. France: 34.4 percent
  4. Belgium: 33.99 percent
  5. Germany: 30.18 percent
  6. New Zealand: 30 percent
  7. Spain: 30 percent
  8. Australia: 30 percent
  9. Mexico: 30 percent
  10. Luxembourg: 28.59 percent
  11. Canada: 28 percent
  12. United Kingdom: 28 percent
  13. Norway: 28 percent
  14. Italy: 27.5 percent
  15. Portugal: 26.5 percent

And it gets worse: The above list doesn’t represent an apples-to-apples comparison. Because while this list includes the complete income tax burden for the non-U.S. countries listed, it doesn’t include state income taxes for U.S. companies. Here are the combined state and federal top rates for the states with the highest taxes…

  1. Iowa: 41.6 percent
  2. Pennsylvania: 41.5 percent
  3. Minnesota: 41.4 percent
  4. Illinois: 41.2 percent
  5. Alaska: 41.1 percent

Bottom line? For the United States to compete in a global environment, the lower our corporate tax rates, the better. But with both federal and state budgets hemorrhaging red ink, relief isn’t likely to come along anytime soon.

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Comments & discussion

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  • http://pulse.yahoo.com/_Y2AV66M27MXAXBDCH3MD2M3574 Switz

    Like so many “Facts” propagandists like to peddle, this one is essentially WRONG:
    The only proper way to compare tax rates is to compare taxes actually PAID per unit of Corporate Revenue. Due to all the loopholes and kick-backs in the US, the REAL income tax rate on US Corporations is not #1 out of 35, it is actually THIRTY FOUR out of 35.
    Next lie?

  • Anonymous

    You should have a companion article on how much of our tax money the U.S. government gives, compared to other countries, to corporations: subsidies, research grants, legislation that lets them ruin the economy (the deregulation of financial markets that caused the current world recession), tax shelters, defense contracts and tax breaks. Another comparing CEO salaries would be great.

  • Anonymous

    You also need to make the point that a tax on a corporation is a cost of doing business that is passed on to the consumer. Ultimately the customer pays the tax. If you add a 50% tax to fast food joints, guess what? The hamburger price goes up. Most people seem to not understand that the corporations must make profits or they will go out of business. All costs of doing business, including taxes on the business, are passed on to the consumer. Hopefully they are able to add some profit to these costs to allow them to employ more people or pay them more.

  • Anonymous

    You also need to make the point that a tax on a corporation is a cost of doing business that is passed on to the consumer. Ultimately the customer pays the tax. If you add a 50% tax to fast food joints, guess what? The hamburger price goes up. Most people seem to not understand that the corporations must make profits or they will go out of business. All costs of doing business, including taxes on the business, are passed on to the consumer. Hopefully they are able to add some profit to these costs to allow them to employ more people or pay them more.

    • Anonymous

      no, if the cost of taxes could simply be passed on to the consumer that means the consumer must be willing to pay that higher price. If that is the case why aren’t corporations charging that higher price now? Are corporations charging lower prices and making less profits then they might?
      the costs of higher corp. taxes are not necessarily passed on to customers, they may instead be passed on to corp management in the form of lower salaries or to shareholders in the form of lower returns on capital. Given that 70% of capital is held by the top 10% of the population and corp executives are vastly overcompensated either of these results would be desireable.

  • Anonymous

    You might also consider how much money corporations & CEO’s hide in Swiss Banks and never pay any tax on!

  • Anonymous

    You should also consider the money Corporations & CEO”s hide in Swiss banks and never pay any tax on at all!

  • Anonymous

    According to the Tax Foundation, which you quoted, Japan has the highest corporate tax rate, while the US is 2nd.

  • http://pulse.yahoo.com/_R6READ4TRHBCZ4BZ6AH2CRI3XM Mickey

    Wow. How could you leave out all the loopholes unless it was intentional? The actual rates, state and federal combined, are significantly lower than in most other nations. According to a 2004 article in the Boston Globe, 66% of U.S. corporations paid NO federal income tax at all during the boom years of 1996 through 2000. The percentage of federal tax collections paid by corporations has tumbled from a high of 39.8 percent in 1943 to a low of 7.4 percent in 2003. [http://www.boston.com/business/globe/articles/2004/04]. Those tax rates sure haven’t been raised. But they should be!

  • http://twitter.com/bmwarabia Harvey Cohen

    Of course, excluding the VAT that is in effect in many of these countries is a disingenuous way of representing the tax burden.

  • http://twitter.com/bmwarabia Harvey Cohen

    Of course this article conveniently ignores the rather significant VAT that many of these countries impose.