We're (going to be) No. 1! Alas | Business Roundtable


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We're (going to be) No. 1! Alas

Mar 17, 2012

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.