Rangel Tax Plan: Take that, Italy!

By October 26, 2007Taxation

A new and very useful “Fiscal Fact” release from The Tax Foundation, “Congress Finally Considers Lower Corporate Tax Rate but Underestimates International Tax Competition“:

Chairman Rangel has proposed to cut the U.S. corporate tax rate from 35% to 30.5%,1 which would make the U.S. rate fourth highest internationally, instead of second highest where it stands right now (see Table 1). The average OECD corporate tax rate, U.S. excluded, is 28.1%.

Although this proposed cut may seem inadequate after what our international trading partners have done, nevertheless Congress is finally trying to catch the wave of corporate income tax reduction that has been sweeping the developed world for more than a decade. Five countries in the Organization for Economic Cooperation and Development (OECD) cut their corporate income tax rates in 2006, and eight more, including Germany, will have cut their rates by January 1, 2008.

In the OECD, only Japan’s 39.5% rate is higher than the U.S. rate right now. The U.S. would leapfrog only Italy and Canada under Rangel’s proposal.2 Germany is one of several countries that had higher tax rates than the U.S. in 2000 but will have a lower rate than the U.S. in 2008 even if the Rangel cut is enacted. Ireland has the OECD’s lowest rate at 12.5 percent.

Includes a handy chart of comparative corporate tax rates, before and after (in theory) adoption of the Tax Reduction and Reform Act.

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