By Conn Carroll
By doing absolutely nothing
President Obama has managed to make the United States a world wide leader in at least one category: high corporate tax rates. As of midnight Sunday when Japan lowered their corporate tax rate from 39.5 to 36.8 the United States now has the highest corporate tax rate in the industrialized world at 39.
While this milestone did happen on Obamas watch he cannot take full credit for the accomplishment.
Learning from the success of President Reagans tax cuts in the 80s the rest of the world has been slashing their corporate tax rates for decades. As recently as 1990 the average corporate tax rate among the worlds largest economies was above 45 percent.
But while other countries have been making themselves more competitive places to do business the United States has been treading water. Today the average corporate tax rate in
the industrialized world is 26 percent.
That is a full 13 points lower than in the United States.
Of course very few businesses pay the full 39 percent rate. Most corporations pay accountants and lobbyists in Washington millions of dollars a year to game the system so they pay a much lower effective rate. As Obamas own Treasury Department has noted however this is terrible for the economy:
Currently tax expenditures in the tax code vary dramatically by industry. … The result is a tax system that distorts investment decisions. By allocating capital inefficiently this system lowers living standards now and could impede technological innovation."
Unfortunately Obamas tax plan only makes this problem worse. The plan does remove some loopholes but mostly just on industries Obama hates anyway (like the oil & gas industry jet manufacturers and insurance companies).
But for every loophole Obama closes he creates another. Manufacturers clean energy firms
and firms that do not do business overseas all get new benefits under Obamas plan.
If you want to maximize the power of Washington to pick winners and losers through the tax code then the higher the nominal corporate tax rate the better.
As long as Obama is president dont expect any real tax reform anytime soon.
Conn Carroll is Senior Editorial Writer for the Washington Examiner. Since moving to Washington D.C. in 1996 he has worked/interned for a member of Congress a polling firm a lobbying firm a media firm a federal agency a federal court and a litigation firm. His journalism career dates back to 2006 when he joined National Journals The Hotline.
