India to Cut Corporate Tax Rate

March 4, 2015

India’s finance minister this week released a budget that includes, among other things, a five per cent reduction in the corporate income tax. Narendra Modi, the Prime Minister of India, won a landslide election last May on a pro-growth agenda.

The proposed budget would move India, one of the world’s largest economies, from a 30 per cent base rate to 25 per cent. (There are some surcharges that push the rate a few points higher by some measurements, including the ones we use at Tax Foundation. We measured the rate at 34% in our last report.)

While Indian tax news is not directly relevant to U.S. policy, it’s important to remember that this fits into a broader picture: the rest of the world has built a sort of consensus that corporate income is a poor tax base, and corporate income tax rates around the world have been steadily falling.

I expect this trend to continue with time. There’s nothing wrong with taxing income people earn from investments in corporations. But there’s a right way and a wrong way to do it. The 401(k) structure, for example, taxes investment income in a fair and elegant way. The corporate tax doesn’t. And that’s why it is in a long, steady decline throughout the world.

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