U.S. Corporate Taxes = High Rates, Little Revenue

FOR IMMEDIATE RELEASE February 10, 2011

In recent weeks, both the White House and congressional Republicans have acknowledged the need to comprehensively overhaul the corporate tax code, whose top rate is the highest of any Organization for Economic Cooperation and Development (OECD) country.

In their latest Tax Policy Outlook, American Enterprise Institute (AEI) economists Kevin Hassett and Aparna Mathur find that, in the OECD, the United States has higher-than-average effective average and effective marginal tax rates--two measures which are the best indicators for capital investors of their true tax liability--despite generating comparatively less tax revenue. Hassett and Mathur note that these high rates reduce U.S. competitiveness and help explain why U.S. companies are moving plants abroad.

Key points from the Outlook can be found below:

  • Effective corporate tax rates (what companies really pay) are a better measure of competitiveness than statutory rates (legally imposed tax rate). Even by this measure, the United States does much worse than the other OECD countries.
  • Corporate tax revenue in the United States is consistently lower than revenues in other OECD countries, despite higher U.S. corporate tax rates.
  • To bring investment and jobs back to the United States, policymakers should cut effective tax rates as part of an overhaul of the U.S. corporate tax code.

Kevin Hassett is a senior fellow and Director of Economic Policy Studies at AEI. He can be reached via his assistant at meagan.berry@aei.org (202.862.4880). Aparna Mathur is a resident scholar at AEI and is available for interview. She can be reached at amathur@aei.org (202.828.6026) or through her assistant at chad.hill@aei.org (202.862.5862). For all other media inquiries, please contact Hampton Foushee at hampton.foushee@aei.org (202.862.5806).

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