Again…We Should Be More Like Europe

Last week I wrote about big changes taking place in the United Kingdom, where Chancellor Osborne vowed to reduce corporate tax rates to 17 percent, the lowest of the G20 countries.   Meanwhile, the United States seems to want to keep its first place spot of having the highest corporate tax rate of the G20.  And it’s worse than combined federal and state statutory rate of 39.1 percent.  According to an analysis by NCPA senior fellow David Tuerck, executive director of the Beacon Hill Institute, taxes on capital (including federal, state and local, and capital gains and dividends) exceed 56 percent in some industries!  Even with a hypothetical 25 percent reduction, tax rates would still be high. (See the chart.)

Effective Marginal Tax Rates by Industry

Under Current Law and Hypothetical 25 Percent Corporate Tax Reduction

SECTOR CURRENT-LAW EMTR TAX-CHANGE             EMTR
Agriculture Forestry and Fishing 49.88% 44.53%
Mining 45.43% 40.08%
Construction 50.11% 44.19%
Food and Tobacco Products 45.89% 40.35%
Textiles and Apparel 45.31% 39.83%
Building Materials 46.85% 41.18%
Paper and Publishing 51.31% 45.73%
Chemicals Petroleum Rubber Plastics 48.53% 42.83%
Business Machinery and Instruments 47.17% 41.23%
Electronics and Electronic Equipment 54.48% 48.08%
Motor Vehicles and Other Transportation 54.13% 48.11%
Primary and Fabricated Metal 44.82% 39.46%
Industrial Machinery and Equipment 47.15% 41.41%
Other Manufacturing 49.17% 43.19%
Transportation 44.57% 39.35%
Communications 47.70% 41.89%
Electricity Gas Sanitary 42.25% 37.50%
Wholesale Trade 46.97% 40.97%
Retail Trade 43.80% 38.48%
Banking 56.06% 50.74%
Insurance 56.60% 50.91%
Real Estate 37.39% 32.76%
Personal and Repair Services 54.50% 48.29%
Business Services 49.36% 43.45%
Health Services 45.83% 40.56%
Hotels Amusements Motion Pictures 42.85% 37.57%
Eating Drinking Miscellaneous Services 43.36% 38.37%
AVERAGE 48.03% 42.36%

Source: David G. Tuerck and James P. Angelini, “The Economic Burden of Corporate Taxation,” National Center for Policy Analysis, Policy Report No. 376, November 24, 2015.

Comments (2)

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  1. PJohnson says:

    Bernie would like to bump that to 90%. Which reminds me of a golf joke. Under Bernie’s plan when you go to buy ball marker, you had him a buck and he gives you a dime.

    OR let the Beatles explain it:
    “Let me tell you how it will be
    There’s one for you, nineteen for me
    Cos I’m the taxman, yeah, I’m the taxman”

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