If only it was a very bad April Fool’s Day joke, but it’s not. As of April 1, the U.S. will have sole possession of the highest corporate tax rate in the developed world. When the average tax that states add to the 35% federal corporate tax is included, American businesses are tagged at a 39.2% rate. Japan is the latest nation to lower the tax rate on business and in so doing will relinquish the dubious top tax rate distinction to the USA.
Over the last two decades OECD nations (The Organisation for Economic Co-operation and Development) have been lowering corporate tax rates. For anyone concerned about America’s ability to compete internationally, see to following chart.
Republicans and Democrats, including Barack Obama, have talked about lowering the business tax rate, but so far, talk is all that has happened. The President’s plan is really a kind of shell game that would raise other taxes in exchange for a lower tax on profit.
The global lowering of corporate rates "is part of a world-wide recognition that high corporate taxes create economic distortions. Most obviously they encourage businesses to locate operations in other countries," according to the editors at the Wall Street Journal. "American liberals argue that most U.S. companies don't pay the top federal statutory rate of 35% because of various loopholes and credits, but the high rate encourages multinationals to keep their profits overseas to invest there rather than in the U.S." concludes the WSJ.
If the President and Congress were truly serious about creating jobs, stimulating the economy and recovering from the deepest, longest recession since the Great Depression then lowering the corporate tax rate to a globally competitive level should be a no-brainer. But, even that doesn't get done in the toxic environment of Washington.