The Washington Post has denounced the inclusion of bonus depreciation in the just-passed tax extenders bill for 2014. The correct term is “partial expensing.” There is nothing “bonus” about it. The...
- The Tax Policy Blog
- Will Obama Call for Cutting the Corporate Rate in SOTU?
Will Obama Call for Cutting the Corporate Rate in SOTU?
In a recent preview of the State of the Union address emailed to supporters, President Obama said his number one focus "is going to be making sure that we are competitive, that we are growing, and we are creating jobs not just now but well into the future." While these are sure to be popular themes with the American public, the question is what policies will he put forward to achieve those goals?
Although a presidential recommendation to dramatically cut the U.S. corporate tax rate would hardly raise the opinion needle for Frank Luntz's in-studio focus group, it would still be a welcome sign that the administration understands one of the biggest obstacles to U.S. competitiveness, investment, and long-term economic growth.
A recent report by economists at the OECD should give the president's team all the justification they need to support such a recommendation. Titled Tax Policy and Economic Growth, the report reiterates previous OECD findings that:
The evidence suggests that "lowering statutory corporate tax rates can lead to particularly large productivity gains in firms that are dynamic and profitable, i.e. those that can make the largest contribution to GDP growth."
As is becoming widely known, next to Japan, the U.S. has the highest overall corporate tax rate among OECD nations. The Japanese government has announced that it will soon lower its corporate rate, leaving the U.S. alone with the highest corporate rate in the industrialized world. This is an indignity that President Obama should not want to happen on his watch.
The chart below, shows how out of step the U.S. corporate rate is compared to the simple average of OECD nations and the weighted average. While the U.S. rate has remained around 39 percent for many years, the simple average of non-U.S. OECD nations was 25.5 percent in 2010 and the weighted average was 30.1 percent.
These non-U.S. averages will fall again in 2011 when Canada's new lower rates are factored in. On January 1st of this year, the Canadian federal corporate rate fell to 16.5 percent from 18 percent.
Subscribe to the Tax Foundation Newsletter
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.