States, Taxing Their Way to Recession

By March 19, 2008Taxation

A new analysis by the Tax Foundation’s president, Scott Hodge, reports that U.S. states are taxing “job providers” at a higher rate than most any country in the world.

From the news release:

Counting the federal rate alone, the U.S. has the world’s highest corporate tax rate, but including average sub-national rates (federal plus state in the U.S.), Japan edges out the U.S. for the highest-tax location (see table).

This new study breaks the tax down state-by-state, adding each state’s corporate tax rate to the federal corporate tax rate. The results show that 25 states impose, when combined with the federal rate, a higher business tax rate than in any other nation. In fact:

  • 25 states have a combined corporate tax rate higher than top-ranked Japan.
  • 35 states have a combined corporate tax rate higher than third-ranked Germany.
  • 46 states have a combined corporate tax rate higher than fourth-ranked Canada.
  • All 50 states have a combined corporate tax rate higher than fifth-ranked France.
  • “If federal lawmakers are serious about making the U.S. corporate tax system more competitive globally, they will have to partner with state officials to lower the nation’s overall corporate tax burden,” Hodge added. “Likewise, state officials should have a vested interest in cutting the federal corporate tax rate because there is only so much they can do to improve their own competitiveness. After all, even corporations in the three states that do not impose a major state-level corporate tax—Nevada, South Dakota, and Wyoming—still shoulder a higher corporate tax rate than France, and 25 other major countries, because of the 35 percent federal corporate rate.”

    Take a look at the chart. It’s actually alarming, from a competitive standpoint.

    For the full Fiscal Fact No. 119, please click here. It’s excellent work.

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