Israel's rate is 15.1%. Hungary is 13.6%, Poland is 13.6%, Czech Republic is 13.4%, Chile is 13.3%, Ireland is 12.3%, the Slovak Republic is 12.2%, Vietnam is 12.2%, Greece is 12.0%, Croatia is 9.8%, Iceland is 9.6%, Obama's birthplace Kenya is 9.1%, Romania is 8.9%, Singapore is 8.8%, Bulgaria is 4.1%, Latvia is 3.8%, Ukraine is 3.7%, and Belgium is -6.5%. A negative tax rate! Belgium actually subsidizes its corporations, which I do not recommend!
There should be no corporate income tax rate, except zero. Most of the rest of the world has substantially reduced their effective corporate tax rates, but not the U.S. State and local sales and asset-based taxes on capital add about 7% to the U.S. effective tax rate, but only 2% to that rate in other countries. Our federal statutory rate is 35.0%. The broad reductions in the statutory rates of other countries in recent years have not been matched in the U.S., which has responded only with a narrow 2005 tax break for "domestic production activities." In 2009, this shaved about 2% from the U.S. effective rate. Congress did enact some temporary "bonus" depreciations for certain capital investments, which were not included in the U.S. effective rate calculation due to their temporary nature.
In comparison, the average statutory rate in the European Union dropped 9.6% since 2000. Canada, our largest trading partner, cut its federal corporate tax rate from 43% to 31% since 2000. Other taxes were also reduced since then. In 2012, the average statutory corporate tax rate in Canada is going to be 26.4% and the effective rate will be 19.5%! The Canadian economy has been growing better than the U.S. economy for some time now as a result. China has similarly been reducing its corporate taxes.
During the 1980s, the U.S. had more direct investment inflow than outflow. In the 1990s and 2000s, the outflow of investment exceeded the inflow. This slows growth and job creation. As the monthly tables I have been doing on unemployment show, the failure of the U.S. economy to create new jobs, while worse during the current recession, has been going on ever since 2000. The high effective corporate tax rate is a major contribution to this problem in poor job creation.
Another problem with our taxes on corporations is that we tax the overseas operations of multinational corporations. In other countries, the multinational corporations can bring profits home from their out-of-country investments without being taxed on them. Those governments are content to tax that money when it is distributed to the people and when it is spent.
Studies have clearly shown that corporate tax rates above 25% result in tax avoidance behavior that actually reduces government revenues from the taxes. The only reason for tax rates higher than 25% is the appeal to ignorance and the let's-soak-the-fat-cats mentality. It is perfectly clear that if we want to create jobs again and continue to have a rising standard of living, we must reduce the effective corporate tax rate. It is best to reduce the statutory corporate tax rate substantially. A reduction to no more than 25% is badly needed.
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