aside How Do US Corporation Tax Rates Compare With Other Countries? (Tax Reform)

Source: Jennifer Jacobs Tweet

Trump’s tax reform:
–individual rates 10, 25 and 35%
–childcare tax credit
–15% business rate
-repeal death tax
-repeal AMT
-repatriation

The reason for why the republicans have been covering for their standard bearer, President Donald Trump is so that they can have a real chance to pass the biggest corporate tax cut that would be considered a once in a lifetime opportunity.

The tax plan introduced today (4/26/17) by the republican President Donald Trump takes the corporate tax rate down to 15% from about 35%. The average corporate tax rate around the world is about 27-29%.

Image result for photos of wallethub companyAs per the 11/3/2016 WalletHub annual Corporate Tax Report,  “Based on the detailed information assembled by its data analysts, John Kiernan tells us “The overall tax rate that S&P 100 companies pay, is around 27-28 percent, and is basically unchanged when compared to 2014 figures.

It is my opinion that a corporate US corporate tax reduction down to 27% would place US businesses in line with competitors around the world without the real possibility of exploding the U.S. deficit to where the tax breaks become counter productive by significantly slowing down the U.S. economy.

Image result for images of president introducing tax reform billOn 4/26/17, Damien Paletta of the Washington Post penned the following report, White House unveils dramatic plan to overhaul tax code in major test for Trump.”

Excerpts:

“President Trump on Wednesday (4/26/17) proposed a dramatic overhaul of the tax code, calling for sharply lower rates for individuals and businesses but also eliminating key tax breaks.”

“The proposal is an outline – key details are left unfinished – but it presents an initial offer to begin negotiations with lawmakers, as White House officials believe reworking the tax code is one of their biggest priorities to boost economic growth.”

“White House officials are ambitious, but the path to overhauling the tax code is riddled with political landmines. Many budget experts believe the White House’s plan would reduce federal revenues by so much that it would grow the debt by trillions of dollars in the next decade, growing interest costs and slowing the economy.”

Image result for images of president introducing tax reform bill
Last tax reform bill under Reagan era

“And Trump’s advisers are looking to axe some tax breaks that are very popular in certain states, including the deduction Americans take for the state and local taxes they pay separately each year. Eliminating this deduction could save more than $1 trillion over 10 years, but inflame lawmakers and governors in states that have high income tax rates.”

“For businesses, Trump’s proposal would lower the corporate tax rate from 35 percent to 15 percent, and it would also allow smaller businesses, structured in such a way that they are affected by the individual tax rate, to also use the 15 percent threshold. There are millions of these businesses, known as “S Corporations,” and they are often small, family-owned firms.”

Image result for images of steven Mnuchin
Steven Mnuchin

“But they can also include large law firms and lobbying shops. Mnuchin said special protections would be put in place to ensure that the 15 percent rate isn’t taken advantage of by the wealthiest earners, though he didn’t say how the White House would do this.”

“The White House is also proposing a one-time tax “holiday” to incentivize companies to bring several trillion dollars currently being held in other countries back into the United States. They didn’t specify what that tax rate would be, saying its currently part of negotiations on Capitol Hill, but they believed providing this incentive would bring money back for investment and hiring.”

“We expect that trillions of dollars will come back on shore and will be reinvested here in the United States, for capital goods and job creation,” Mnuchin said.”

Image result for images of president introducing tax reform bill“This process is called “repatriation.” It’s controversial, because critics allege the money is brought back and then paid out in dividends to shareholders, not used for hiring. But Democrats and Republicans have both been open to the idea of a tax holiday. The Obama administration proposed using one to bring money back into the United States that could be used for new infrastructure projects, for example.”

Overall Plan

“It would eliminate the seven existing income tax brackets and replace them with three brackets, containing new rates of 10 percent, 25 percent, and 35 percent, based on someone’s income. White House officials haven’t specified which income levels would hit the higher tax brackets, as they see that as part of ongoing discussions with Capitol Hill.”

“It would also roughly double the standard deduction that Americans can use to reduce their taxable income. The deduction for married couples would move from $12,600 to $24,000. This would incentivize people not to itemize their tax returns and instead use the standard deduction, simplifying the process and potentially saving taxpayers thousands of dollars each year.”

Image result for images of steven MnuchinOn 8/18/16, Kyle Pomerleau and Emily Potosky of the Tax Foundation published the report, “Corporate Income Tax Rates Around The World, 2016.

Excerpts:

Key Findings:

  • The United States has the third highest general top marginal corporate income tax rate in the world, at 38.92 percent. Due to the recent reduction in Chad’s corporate tax rate, the U.S. rate is exceeded only by the United Arab Emirates and Puerto Rico.
  • The worldwide average top corporate income tax rate, across 188 countries and tax jurisdictions, is 22.5 percent. After weighting by each jurisdiction’s GDP, the average rate is 29.5 percent.
  • By region, Europe has the lowest average corporate tax rate, at 18.88 percent (26.22 percent, weighted by GDP). The G7 has the highest simple average, at 30.21 percent.
  • Larger, more industrialized countries tend to have higher corporate income tax rates than developing countries.
  • The worldwide average corporate tax rate has declined since 2003 from 30 percent to 22.5 percent.
  • Every region in the world has seen a decline in its average corporate tax rate in the past thirteen years.Image result for images of president introducing tax reform billIntroduction

“It is well known that the United States has the highest corporate income tax rate among the 35 industrialized nations of the Organisation for Economic Co-operation and Development (OECD). However, it is less well known how the United States stacks up against countries throughout the entire world. Expanding the sample of countries and tax jurisdictions to 188, the U.S.’s corporate tax rate of almost 39 percent is the third highest in the world, lower only than the United Arab Emirates’ rate of 55 percent and Puerto Rico’s rate of 39 percent. The U.S. tax rate is 16.4 percentage points higher than the worldwide average of 22.5 percent and a little more than 9 percentage points higher than the worldwide GDP-weighted average of 29.5 percent. Over the past ten years, the average worldwide tax rate has been declining, pushing the United States farther from the norm.”

Image result for images of president introducing tax reform billThe US Has the Third Highest Corporate Tax Rate among 188 Nations

“The top marginal corporate tax rate among the 188 countries surveyed was the United Arab Emirates, which has a top rate of 55 percent (Table 1). The United States, with a combined top marginal tax rate of 38.9 percent (consisting of the federal tax rate of 35 percent plus the average tax rate among the states), has the third highest corporate income tax rate in the world, slightly behind Puerto Rico. In contrast, the average across all 188 countries is 22.5 percent, or 29.5 percent weighted by gross domestic product (GDP).”

“Every region in the world except for Oceania is represented in the top twenty countries. Six of the top twenty countries are in Africa, two of the top twenty countries are in Asia, and four are in Europe. The eight remaining countries are in South and North America.”

Image result for images of president introducing tax reform bill“Other large nations in the top twenty besides the United States are France (34.4 percent), Brazil (34 percent), and India (34.6 percent).”

Table 1. Twenty Highest Top Marginal Corporate Tax Rates in the World
Country Top Rate Region
United Arab Emirates 55.0% Asia
Puerto Rico 39.0% North America
United States 38.9% North America
Argentina 35.0% South America
Chad 35.0% Africa
Congo, Democratic Republic Of The 35.0% Africa
Equatorial Guinea 35.0% Africa
Guinea 35.0% Africa
Malta 35.0% Europe
Virgin Islands, U.S. 35.0% North America
Zambia 35.0% Africa
India 34.6% Asia
Sint Maarten 34.5% North America
France 34.4% Europe
Brazil 34.0% South America
Venezuela 34.0% South America
Belgium 34.0% Europe
Monaco 33.3% Europe
Saint Lucia 33.3% North America
Cameroon 33.0% Africa
Worldwide Average 22.5% N/A
Worldwide Weighted Average (by GDP) 29.5% N/A

“Among countries with corporate income taxes, Turkmenistan and Uzbekistan have the lowest top marginal rate at 8 percent and 7.5 percent respectively (Table 2). Nine countries have top rates of 10 percent, most of them small nations in Europe (Bosnia and Herzegovina, Macedonia, Gibraltar, Andorra, Bulgaria). The only major industrialized nation among the bottom 20 countries is Ireland, which is known for its low 12.5 percent rate.”

8 comments

  1. There must be adequate restraints on tax “windfalls” for the wealthy. That is requirements that this found money needs to be coming back into the economy, not just adding to the piggy-banks of the rich while services to the rest are curbed or discontinued. Jobs must be created…no spending the big money on goodies like robots to do the manufacturing jobs so that the work force can be shrunk and therefore profits zoom.

    • Dear Gradmama2011,

      And there’s the rub. With the tax reductions for companies, there is no guarantee that this will translate to not only more jobs, but better paying jobs instead of more monies in the piggy banks. Many businesses are currently sitting on a lot of cash in its coffers which is not being used to expand, to hire more employees, to raise salaries, etc.

      This tax plan is not what DDT’S supporters were expecting.

      Hugs, Gronda

      • as if they knew what they were expecting… Walmart is hiring for four-hour shifts…no overtime, if they don’t finish their work they leave it for the next shift. The jobs are leaving now, not coming back from Mexico as advertised. But the “base” doesn’t know what is happening…and it seems anything Trump does is fine with them.

        • Dear Gradmama2011,

          This is simply a deficit exploding tax cut for the wealthy with a little thrown in for the middle class to help republicans sell it. There is no way that this tactic will boost this U.S. mature economy beyond 2% per year which is not enough to bring in the extra revenues that republicans are promising.

          The republicans are blowing away a real opportunity for a genuine tax reform plan. This is what “special interests” and greed gets the average tax payer.

          Hugs, Gronda

        • the nasty Republicans put me in the poor house years ago. 🙂 Trump’s “base” are the ones to get hit the hardest, but they aren’t smart enough to realize it.

  2. Reblogged this on 1EarthUnited and commented:
    Excellent research Gronda, statistically Corporations pay around 13% or less of their operating earnings after interest, tax, depreciation and amortization (EBITDA), including those fat corporate deductions and they wind up paying very little, esp if they divest thru associating shell corps.
    Trump’s 15% across the board would actually force business to pay more in taxes!
    It’ll be interesting how they iron out the details.

    • Dear 1EarthUnited,

      We shall see. if companies were to be required to pay the minimum of 15% while giving up subsidies and all the tax loopholes, it might fly. But I doubt that corporations would go for this.

      I wonder how this effects the president’s financial well being.

      Thanks a million times over for your support and for this reblog.

      Hugs, Gronda

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