I'm a Texan. We naturally aspire to be at the top of anything. But even the Texan in me knows that the latest list showing the United States as number one is not good.
Today the U.S.A. became the country with the highest corporate tax rate in the world.
No April Fools' joke here. Today the United States took this undesirable tax title from Japan, which had held the top spot since 2001 with its combined corporate tax rate of 39.5 percent, the highest among Organization for Economic Cooperation and Development (OECD) nations.
But today, April 1, 2012, Japan's corporate tax rate dropped to just over 38 percent. That means America's 39.2 percent combined federal-state corporate rate is the world's highest.
And that rate is this week's By the Numbers figure.
We took the top spot after eight years of having the second-highest corporate tax rate among industrialized countries. The Tax Foundation has looked at the corporate tax rate numbers over the last decade. The table below shows the current top 10 OECD countries when it comes to taxing businesses.
|
2012 |
Country |
2012 |
2002 |
Change in Ranking 2002-2012 |
|
1 |
United States |
39.2% |
39.3% |
2 |
|
2 |
Japan |
38.01% |
40.87% |
-1 |
|
3 |
France |
34.4% |
35.43% |
5 |
|
4 |
Belgium |
34% |
40.17% |
-2 |
|
5 |
Germany |
30.2% |
38.9% |
-1 |
|
6 |
Australia |
30% |
30% |
13 |
|
6 |
Mexico |
30% |
35% |
3 |
|
6 |
Spain |
30% |
35% |
3 |
|
9 |
Luxembourg |
28.8% |
30.38% |
9 |
|
10 |
New Zealand |
28% |
33% |
4 |
You can check out the full listing at the Tax Foundation's complete table, which allows for various ways to sort the data.
Corporate tax change ideas: At least we backed into the lead. As the table shows, over the last decade the U.S. combined corporate tax rate went up just 0.1 percent.
But regardless of how we moved to the top of the corporate tax rate list, taking over that dubious honor underscores why everyone in Washington, D.C., company boardrooms and political punditry gatherings is talking about corporate tax reform.
We've heard from the President. The Obama Administration proposal would eliminate tax expenditures and subsidies (i.e., close loopholes), broaden the corporate tax base and cut the corporate tax rate to 28 percent.
We've heard from Congress. Last week, the Republican-controlled House passed House Budget Committee Chairman Paul Ryan's plan, which would lower the top corporate tax rate from 35 percent to 25 percent. There's little chance, however, that it will be approved by the Senate.
And we've heard from corporate America. Sure, a lot of businesses are doing OK under the current system. No one at GE, IBM, Hewlett-Packard et al are complaining about low or no U.S. tax bills thanks to the current tax system's many loopholes.
But the RATE Coalition, a group of 26 companies and organizations lobbying for corporate tax reform, called for lowering the tax rate. "America taking the 'lead' in gaining the dubious distinction of being the world 'leader' in high corporate taxation is no April Fools' joke. The United States is soon to be 'number one' in anti-competitiveness," said James Pinkerton, co-chair of the business group and a former White House domestic policy adviser to Presidents Ronald Reagan and George H.W. Bush.
Apple tax issues: One iconic U.S. company also has weighed in on the corporate tax changes.
Apple, which was founded on this day in 1976, recently made news when it announced it would issue shareholders their first dividend payout since 1995.
In announcing the dividend, Apple also made it clear that the company won't bring the large chunk of corporate money it now has in overseas operations back to the United States. The reason? The U.S. tax code.
"Repatriating cash from overseas would result in significant tax consequences under U.S. law," said Apple CFO Peter Oppenheimer during a conference call with analysts on March 19.
"We have expressed our views to Congress and the administration," said Oppenheimer. "We think current tax laws provide significant disincentive to U.S. companies that would otherwise repatriate the significant cash they have on hand."
Most of Apple's revenue is earned overseas, according to the Wall Street Journal's Deal Journal blog, with two-thirds of its cash parked abroad. The reason, says the WSJ blog, citing Bernstein Research, is that Apple pays an international tax rate of less than 3 percent. Most large Standard & Poor's 500 firms pay an international tax rate of between 13 percent and 25 percent.
Expect to hear more such numbers tossed around as the presidential race and tax reform discussions heat up in the coming months.
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