In a recent study, the Tax Foundation confirmed that the US has the highest rates of corporate tax rate of any developed nation – at 38.91% – and ranks fourth highest in the entire world.
“The United States statutory corporate income tax rate is 15.92 percentage points higher than the worldwide average, and 9.5 percentage points higher than the worldwide average weighted by gross domestic product,” the Tax Foundation’s report further states, even though the worldwide average corporate tax rate is now only 22.96%.
Trump’s tax plan aims to decrease corporate tax down to 20%, and make the United States competitive in the global market again. Introducing the plan last week, Trump announced, “We will cut taxes on American businesses to restore our competitive edge and create more jobs and higher wages for the American worker.” The President also highlighted that, unfortunately, “when it comes to business tax, we are now dead last among developed nations. We have the highest tax of any nation in the world—our rate is the least competitive rate.”
Reducing the corporate tax rate is important, because if the rate is too high, businesses will either 1) fail to start up or succeed in the US or 2) businesses will relocate to other countries, to hire and invest overseas.
Trump’s tax proposal was released jointly by the Senate Finance Committee, and the powerful House Ways and Means Committee.
Trump’s tax plan is based on the following principles; cutting taxes for middle-class Americans’ making the tax code simple and easy to understand, cut taxes on businesses to restore America’s competitive advantage, creating more jobs and higher wages for American workers, and encouraging companies to bring back trillions in wealth from overseas to the United States.
Speaking at the Joint Economic Committee Hearing earlier this week, President of the Tax Foundation, Scott Hodge detailed that, “the most dramatic of these changes are the significantly lower tax rates for C-corporations and pass-through businesses,” he said. “The framework proposes a 20 percent tax rate for C-corporations and a top tax rate of 25 percent for pass-through business income.”
“You should aim to get the tax code out of the way of entrepreneurs by making it simpler, less burdensome, and eliminating its antigrowth biases,” Hodge urged lawmakers in attendance. “Get rid of the success taxes and fix the quirks in the code that punish firms as they grow, and then tax them in a normal fashion when they succeed,” he demanded.
