Would President Joe Biden’s corporate tax rate proposal bring the United States in line with other major countries? Or would it make the US the best corporate taxpayer in this group?
Democrats and Republicans are at odds on this issue when Biden proposed using a corporate tax hike as payment for his infrastructure plan.
Biden wants to increase the federal tax rate for companies from 21% to 28%. This increase would keep the tax rate below 35% before President Donald Trump signed a tax bill in 2017.
Republicans argue that a 28% increase would put the United States at a competitive disadvantage. West Virginia Senator Joe Manchin, a moderate Democrat whose support is needed to pass such a bill, has previously said he opposes a 25% increase.
During an appearance on CNN’s State of the Union, Energy Secretary Jennifer Granholm spoke out in favor of Biden’s 28% target.
“You recall that just a few years ago the corporate tax rate was 35%, and when Donald Trump passed his corporate and tax cuts for the wealthy package, he dropped it to a point no one asked for, which resulted in 21% “said Granholm during the interview on April 4th. “So what Joe Biden is saying is let’s get it down to a reasonable middle. Let’s get in line with other developed nations that are at 28%.”
We checked whether Biden’s proposal would “bring us in line with other industrialized nations” on corporate taxation. The reality is that the new US rate will be either the highest or a fifth of the highest rate depending on the metric used.
A look at the data
For the most complete comparisons between counties and countries, experts generally look at a country’s national corporate tax rate plus a weighted average of the tax rates for its subnational units. (In the US, these would be states with corporate tax rates.)
While the national rate under Biden’s plan would be 28%, experts have calculated that the national plus sub-national rate under the proposal would average 32.34%.
We examined both measurements using data compiled by the Organization for Economic Co-operation and Development (OECD), a group of 38 economically advanced nations often used as proxy for the “industrialized nations” referred to by Granholm.
By using the more expansive tax rate – national and subnational corporate taxation – the passing of von Biden’s proposal would place the United States at the top of the list of advanced nations for corporate taxation. The closest would be Portugal with a combined rate of 31.5%.
By this standard, Granholm is wrong.
By comparison, the United States’ current combined corporate tax rate of 25.76% is slightly higher than the median for advanced countries.
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Biden’s proposal “would put us at the top of the OECD, if only slightly above some of the other major economies,” said Eric Toder, co-director of the Urban Institute-Brookings Institution’s Tax Policy Center.
In the case of an even more elitist selection of the world economies, the group of the seven industrialized nations, the proposed rate would also come in first place.
The combined rate of the United States of 32.34% would be that of Germany (29.9%), Japan (29.74%), Italy (27.81%), Canada (26.47%), France (25, 83%) and the United Kingdom (19%). .
National prices only
Looking at the national rate alone, the equation changes slightly, but the United States remains at the top of the OECD rankings.
Biden’s proposed rate of 28% would be among Australia (30%), France (32%), Colombia (32%), Costa Rica (30%), Mexico (30%) and Portugal (7%) among the 38 nations on the list seventh place. 30%) and connected to New Zealand (28%).
In other words, the US would belong to a fifth of the OECD countries.
In comparison, the current national corporate tax rate of 21% in the United States would better fit the phrase “in line” with other developed nations, as Granholm put it. With the current rate of 21%, the United States is broadly in the middle.
For the G7, the United States’ national rate of 28% would come second after France (32%) and ahead of Italy (24%), Japan (23.2%), the UK (19%) and Germany (15.8%) Place) and Canada (15%).
Granholm’s office focused on the national rate, arguing that national politics was the only thing the administration could control, saying it was roughly in line with other developed countries to be in seventh place in the OECD.
They added that the United States has the lowest percentage of its GDP that comes from corporate taxation in any of the G7 countries, according to the Peter G. Peterson Foundation. This is partly because the United States’ current rate is the lowest of the G7 countries except for the United Kingdom.
Granholm said Biden’s increase in the corporate tax rate would “bring us in line with other developed nations.”
With the most expansive measure, a combination of national and sub-national rates, after Biden’s proposal went into effect, the United States would actually rank highest among the 38 OECD countries often used as proxy for leading industrial nations.
At the national rate only, the US would rank below Australia, France, Colombia, Costa Rica, Mexico, and Portugal, and be connected to New Zealand (28%). But that would still be in the top fifth of advanced countries.
We mostly misjudge the statement.