The White House and the Republicans of Congress argue over President Joe Biden’s infrastructure proposal. Both sides are focused on the corporate tax rate, an important source of funding for the new initiatives.
Biden suggests increasing the federal corporate tax rate from 21% to 28%. This is below the 35% rate that existed prior to the tax bill signed by President Donald Trump in 2017. However, Republicans say a 28% increase would put the United States at a competitive disadvantage versus other countries with lower corporate tax rates. (Senator Joe Manchin of West Virginia, a moderate Democrat whose support is needed to pass such a bill, has previously said he opposes an increase above 25%.)
In an April 4 appearance on Fox News on Sunday, Senator Roy Blunt, R-Mo., Reiterated the argument that the United States cannot afford to raise its corporate tax rate to 28%.
“If we went back to 28%, we’d probably be number 2 in the world for corporate taxes,” said Blunt.
Blunt is right, but he left out a few important phrases.
For the most complete country-to-country comparisons, 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%.
The Tax Foundation collects corporate tax rates each year for virtually every nation and subdivision. By their calculations, Biden’s proposed combined corporate tax rate would rank 20th in the world.
“This is wrong with the world’s highest corporate tax rates,” said Elke Asen, a policy analyst at the Tax Foundation. Eric Toder, co-director of the Urban Institute-Brookings Institution’s Tax Policy Center, agreed with this assessment.
Here is a list of the 25 best corporate tax rates in the world if Biden’s proposal is implemented as it is. (The Tax Foundation’s list includes some autonomous and quasi-autonomous regions that have their own corporate tax rate, such as Puerto Rico and American Samoa, which are U.S. territories.)
But there is one important caveat: most of the countries with higher corporate tax rates than Biden’s suggestion are relatively small economies. Of the larger economies, only Brazil would have a higher combined rate and France and Portugal would be only slightly lower.
Katie Boyd, a spokeswoman for Blunt, said the senator intended to benchmark the United States against the larger economies. Biden’s combined rate would be higher than any country in the two groups of advanced industrialized nations – the Organization for Economic Co-operation and Development and the Group of Seven.
A look at all OECD members shows that the Biden proposal would be higher than another member’s combined rate, with Portugal coming closest.
Looking only at the national rate, the Biden proposal would rank seventh among the 38 OECD among Australia (30%), France (32%), Colombia (32%), Costa Rica (30%) and Mexico (30) – States occupy%) and Portugal (30%) and connected with New Zealand (28%). That would be a fifth of the OECD countries.
Blunt said Biden’s proposal would make the US “No. 2 in the world” for the highest corporate tax rate.
Strictly speaking, Blunt is wrong: if Biden’s proposal is implemented as it is, at least 19 countries would still have a higher corporate tax rate when national and sub-national tax rates are combined. With the exception of Brazil, however, these are mostly small economies.
Instead, if you compare the United States to other advanced industrialized nations, Blunt has a point: the combined national and sub-national tax rate on Biden’s proposal would be higher than any other OECD country, and the national tax rate of 28% alone would rank the top Fifth of the OECD countries.
We rate the statement as half true.