1.6: Corporate Taxes

Reform the corporate tax system.

Other Information:

Relative to other countries, the U.S. has a high corporate tax rate. The high tax rate makes our corporations less competitive because it raises their operating costs. Although we have the second highest statutory corporate income tax rate among other Organization for Economic Co-operation and Development (OECD) countries, whose economies are comparable to our own, U.S. revenue for corporate taxes is the fourth lowest in the OECD as a share of the economy (gross domestic product—GDP). This is partly due to the fact that many U.S. corporations move their operations overseas to avoid our relatively high corporate tax rate. Other corporations create special non-corporate businesses (such as S-corporations) that allow them to avoid taxation on some of their income. The corporate tax system also includes many special deductions and credits that benefit specific business activities. For example, corporations are allowed a special deduction for income produced domestically, and receive special tax treatment for employee stock ownership plans. Some tax economists argue that many of these provisions distort economic activity, and increase complexity and the cost of accounting. These provisions also reduce the effective tax rate that most corporations pay. Reforms to reduce marginal tax rates for corporations and broaden the corporate tax base could result in more efficiently raised revenues, easier administration, and reductions in the cost of compliance.

Stakeholder(s):

• U.S. Corporations

Indicator(s):

Indicator:1

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