US ranks 32nd in tax burden on business
There's "economic patriotism" and then there's just being a smart businessperson.
The Tax Foundation has launched a new statistical benchmark that ranks the 34 most industrialized countries in the world according to 40 different tax criteria.
The US came in 32nd. Only Spain and Italy finished lower.
The low US ranking helps explain why inversions are becoming so popular - something that enrages President Obama and the Democrats who see all that tax money leaving the country for sunnier climes.
The Tax Foundation benchmark compares developed economies with large and expensive governments, but the U.S. would do even worse if it were measured against the world's roughly 190 countries. The accounting firm KPMG maintains a corporate tax table that includes more than 130 countries and only one has a higher overall corporate tax rate than the U.S. The United Arab Emirates' 55% rate is an exception, however, because it usually applies only to foreign oil companies.
The new ranking is especially timely coming amid the campaign led by Messrs. Obama and Schumer to punish companies that move their legal domicile overseas to be able to reinvest future profits in the U.S. without paying the punitive American tax rate. If they succeed, the U.S. could fall to dead last on next year's ranking. Now there's a second-term legacy project for the President.
The new index also suggests taxation is a greater burden on business in the U.S. than in countries that American liberals have long praised as models of enlightened big government. Finland, Germany, Norway and Sweden, with their large social safety nets, all finish in the top 20 on the new ranking. The United Kingdom manages to fund socialized medicine while finishing 11 spots ahead of the U.S.
The new champion of tax competitiveness is Estonia, where—liberals may be astonished to learn—people enjoy the rule of law and even paved roads, despite reasonable tax rates. (See the list nearby.)
Liberals argue that U.S. tax rates don't need to come down because they are already well below the level when Ronald Reagan came into office. But unlike the U.S., the world hasn't stood still. Reagan's tax-cutting example ignited a worldwide revolution that has seen waves of corporate tax-rate reductions. The U.S. last reduced the top marginal corporate income tax rate in 1986. But the Tax Foundation reports that other countries have reduced "the OECD average corporate tax rate from 47.5 percent in the early 1980s to around 25 percent today."
Instead of trying to shame companies to stay in America by calling them "unAmerian" for wanting relief from our sky high taxes, perhaps we could reform the tax code? it can be revenue neutral by lowering the overall rate while closing some loopholes for specific industries.
But Obama and the Democrats don't want reform - they want the cash. So the GOP is going to be on its own when it comes to reforming business taxes. Such an effort could get underway as early as next year if the Republicans take control of the Senate. There certainly isn't a lack of ideas. Only the will to get it done.