Over the weekend, the United Kingdom’s Chancellor of the Exchequer, George Osborne, pledged to lower the corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rate to 15 percent from the current 20 percent. In pledging the rate cut, Osborne cited the need to keep the UK competitive as it exits the European Union.
Interestingly, this time last year, Osborne had pledged to lower the UK’s corporate income 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 to 18 percent by 2020. Already, the UK has some of the of the lowest corporate taxes when it comes to the community of developed nations. With this latest pledged rate reduction, the UK will continue to increase its competitive edge in the global business climate.
What does this mean for the United States? For one, it shows that we are far behind the rest of the industrialized world when it comes to reducing the tax burden placed on corporate income. Countries worldwide have been consistently cutting their top marginal corporate tax rates, while the United States has maintained its comparatively high rate. At 39 percent, the U.S. corporate income tax rate is behind only Chad (40 percent) and the United Arab Emirates (55 percent), and the highest among industrialized nations.
If the United States sticks to the trend of maintaining its high corporate rate as other countries lower theirs, our country will attract less and less investment, impacting wages and job growth. Most of the world has taken steps to lower corporate taxes, and there are voices in the United States calling for the same. When it comes to attracting business and income growth to our shores, the United States should take a page out of the UK’s (and the rest of the developed world’s) book.
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