Sort by

The Big Lie: Corporate Taxes Aren't Higher in U.S.

David Callahan

It's hardly news when House Budget Chairman Paul Ryan distorts the facts about fiscal policy -- his supposed area of expertise -- but it still surprises me nonetheless.

Consider this whopper from a recent interview:

Capital is so much more mobile than it ever used to be and when we tax our employers, our manufacturers, our exporters, our job creators at rates that are much higher than our foreign competitors tax theirs, that’s when we lose. At this time, our tax rates are among the highest in the industrialized world and that’s putting us at a huge competitive disadvantage. We need to get our tax rates down so we can be more competitive.

Ryan is talking about corporate income tax here, and he is repeating one of the most common lies told by the right -- so common, in fact, that you can hear it nearly every day if you follow the GOP presidential primary.

Let's be clear here: Corprate tax burdens are not higher in the U.S. than in the rest of the industrialized world. In fact, the opposite is true.

While the official U.S. top corporate income tax bracket is higher than most countries, it is well known that few companies actually pay that rate -- and, indeed, many pay nothing at all. The General Accounting Office reported in 2008 that two out of every three United States corporations paid no federal income taxes during a given year from 1998 through 2005.

Paul Ryan is well aware that the corporate income tax code is littered with loopholes. As he said in the same interview: "You have protected industries, businesses that have been singled out for favors in the tax code."

Yet he doesn't acknowledge how these loopholes make it absurd and misleading to compare official tax rates across countries. The more accurate comparison is the corporate tax burden as a percentage of GDP. And if you look at these numbers, using the OECD's data tables, you find that the U.S. burden is lower than many other countries.

In 2008, the average corporate tax burden in OECD countries was 3.5 percent. Japan clocked in at 3.9 percent; Canada at 3.3 percent; the U.K. at 3.6 percent; Australia at 5.9 percent; France at 3.5 percent; Germany at 1.9 percent; and the United States just below Germany at 1.8 percent. Only one country had as low of a corporate tax burden as the U.S. in 2008 and that was Turkey. (The tables allow you to analyze different years if you don't like 2008.)

In 2009, U.S. corporations made about $1.5 trillion in profits and paid $225 billion in taxes, an overall rate of 15 percent -- less than half the top rate. 

As for other taxes, including on employers and individuals, it is well known that overall tax burdens are lower in the U.S. than any other industrialized democracy, so I won't through all those numbers, too.

In short, I have no idea who the heck Paul Ryan is talking about when he says "we need to get our tax rates down so we can be more competitive."

China, perhaps? India?

Are we now comparing our taxes to that of countries where hundreds of millions of peasants still live in absolute poverty and don't pay a dime to national treasuries? I hope not.