According to the Tax Foundation, the proposed corporate income tax increase in the Build Back Better Act, proposed by the U.S. House Ways and Means Committee this week, is higher than it appears.
In a recent blog post, authors Alex Muresianu and Eric York pointed out that most companies would expect a tax rate higher than 26.5 percent, while the Reconciliation Act increased the federal tax rate from 21 percent to 26.5 Percent would increase. This is because most states also levy a corporate income tax.
Including the average state corporate tax rate, the US would have an average corporate tax rate of 30.9 percent. This would be the Organization for Economic Cooperation and Development (OECD) highest corporate tax rate, behind Colombia and Portugal.
“According to current law, the USA is exactly in line with the OECD peer countries and is even in the middle when it comes to corporate taxation. Going back to the top of the OECD on corporate tax rates would be costly for several reasons: It would discourage investment and encourage companies to shift their profits and relocate, resulting in fewer job opportunities for Americans and less tax revenue for the U.S. government , ”Wrote Muresianu and York.