U.S. Corporate Tax Competitiveness: A Senator Speaks Out

December 2, 2005

Oregon Senator Gordon Smith had some interesting comments this week on the U.S. corporate tax system. Speaking in Oregon on Wednesday, Senator Smith said that the U.S. needs to “re-think its taxation policy to remain competitive.”

As evidence of our lack of competitiveness, Senator Smith remarked that it costs $1 billion more to create a new wafer plant in the U.S. than in other world regions.

We recently released a special report comparing U.S. statutory and effective tax rates on corporate income. Our findings support Senator Smith’s assertions: the U.S. has the highest statutory corporate income tax rate (state and federal) in the OECD and the fourth highest effective tax rate on manufacturing and services.

Thus, it will not be politically easy to make our corporate tax system competitive. In order to restore the U.S. rate to the OECD average, Senator Smith would need to convince his congressional colleagues to reduce the federal corporate rate to 25 percent.

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