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Sweden to Lower their Corporate Rate to 22 Percent, 18 Points below Ours

2 min readBy: William McBride

The Swedes do a few things right: the Nobel Prize, Midsummer, and corporate tax reform:

Determined to improve conditions for growth and competitiveness, the government plans to invest in infrastructure, research and innovation. The government also plans to improve conditions for enterprise and entrepreneurship to ensure that the Swedish economy remains competitive.

To this end, the government plans crucially to cut the corporate taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. rate from 26.3% currently to 22% to improve prospects for new jobs and investment.

The government has also announced plans to continue work on preventative measures to maintain financial stability, to reduce the risk of recourse to taxpayers if banks take unnecessary risks and to strengthen consumer protection.

In all, the finance ministry expects gross domestic product (GDP) to increase by 1.6% in 2012 and by 2.7% in 2013. Public finances are expected to show a limited deficit in both 2012 and 2013.

The budget still leaves margins to further stimulate the economy should the crisis in the euro area deepen.

Commenting on the 2013 budget bill, Sweden’s Finance Minister Anders Borg said:

“The responsible policy conducted by the government has served Sweden well. Growth and employment have developed better than in most other countries in our region, while our public finances are among the strongest in the EU. Because of this, we can now turn our attention away from emergency crisis management and focus on investing in the future, getting more people into work and further strengthening Sweden's strong position.”

Meanwhile, we are dithering with a corporate rate that is the highest in the industrialized world: 35 percent at the federal level plus another 5 percent on average at the state level. Romney would reduce the federal corporate rate to 25 percent, and Obama would reduce it to 28 percent, which would still leave us well above Sweden and most other developed countries.

Amazingly, there are still a few people, like Bruce Bartlett, who claim U.S. corporate taxes are "quite low", on the basis that corporations reduce their taxes through various deductions and credits. Sure, they do here, and do elsewhere, and when those effective rates are compared the U.S. still comes up with nearly the highest corporate rate in the industrialized world. In the most recent study, just released by Cato, the U.S. has the highest effective corporate rate in the industrialized world.

Follow William McBride on Twitter @EconoWill