Corporate tax: only a piece of tax revenue pie
Business taxes may be high in the US, but overall, Americans are not overtaxed.
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Because the corporate tax in only a piece of the U.S. revenue system, it is important to think more broadly about all taxes. And when you do, it is clear that Americans are hardly overtaxed, at least compared to the rest of the developed world. One reason is that the U.S.is about the only major industrialized nation that does not also have a Value-Added Tax or national sales tax. For instance, advocates for low corporate taxes love to talk about Ireland’s 12.5 percent combined corporate rate. But they usually don’t say much about Ireland’s VAT, which has a top rate of 21 percent. Indeed, those countries with the lowest corporate rates, such as the Slovak Republic and Poland, raise a big chunk of their tax revenue though a VAT, where their rates tend to be among the world’s highest. The money, they have learned, has to come from somewhere.
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Howard Gleckman is a resident fellow at The Urban-Brookings Tax Policy Center, the author of Caring for Our Parents, and former senior correspondent in the Washington bureau of Business Week. (http://taxvox.taxpolicycenter.org)
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Add it all up and the U.S. collects far less in taxes than most of our trading partners. In 2008, for instance, Americans paid about 26 percent of GDP in total taxes. The average among developed countries was 35 percent. Ireland collected 29 percent, Canada 32 percent, and Germany 37 percent. Only Turks and Mexicans paid less than Americans.
I don’t mean to suggest that having a high corporate rate is good. It isn’t. But Obama is doing all of us–including the business community–a disservice by talking about that statutory rate alone, as if it had nothing to do with other business taxes, individual income taxes, and even consumption taxes such as a VAT. That corporate rate does not exist in isolation.
At the Chamber, Obama joked that perhaps he would have gotten off to a better start with the business lobby had he brought them a fruitcake when he first moved into the White House. I guess he felt that yesterday’s bit of tax pandering made up for the omission.
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