U.S. Would Have Third-Highest Corporate ...

U.S. Would Have Third-Highest Corporate Tax Rate in OECD Under Ways and Means Plan

Sep 15, 2021

From the Tax Foundation

The reconciliation legislation introduced by Democrats on the House Ways and Means committee would increase the top federal corporate tax rate from 21 to 26.5 percent. However, most companies would face a higher tax rate than 26.5 percent, given that most states also levy a corporate income tax.

In the initial Biden administration infrastructure proposal, which would raise the federal corporate income tax rate to 28 percent, the United States would have had the highest average corporate tax rate in the Organization for Economic Co-operation and Development (OECD), at 32.3 percent, inclusive of the average state corporate tax rate. Under the Ways and Means text, the U.S. would have an average corporate tax rate of 30.9 percent, which would be the third-highest corporate tax rate in the OECD, behind only Colombia and Portugal.

Under current law, the U.S. is right in line with OECD peer countries, and actually near the middle of the pack as far as corporate taxation goes. Returning to near the top of the OECD in corporate tax rates would be costly for a few reasons: it would disincentivize investment and encourage firms to shift profits and locate elsewhere, resulting in fewer job opportunities for Americans and less tax revenue for the U.S. government.

U.S. Would Have Third-Highest Corporate Tax Rate in OECD Under Ways and Means Plan

Enjoy this post?

Buy Michael Lodge, The Business Advisor a coffee

More from Michael Lodge, The Business Advisor