The Tax Foundation reported last week: “Canada, the Czech Republic, Korea, and Sweden all cut their corporate tax rates in 2009, distancing the United States even further from the pack with its combined federal and state rate of 39.1 percent—second only to Japan for the highest corporate tax rate among nations in the Organization for Economic Cooperation and Development (OECD). A Tax Foundation analysis of new OECD data finds that 2009 marks the 12th consecutive year in which the U.S. corporate tax rate is higher than the average rate among non-U.S. OECD nations—and roughly 50 percent higher than that of a mid-ranked country such as Sweden.”
Douglas Holtz-Eakin wrote on Global Competitiveness and the Corporation Income Tax for Heritage earlier this year:
Among the most common misperceptions about corporate taxation–perhaps the one that has most impeded significant reform–is that it burdens only the wealthy or those who hold capital. Faced with revenue pressures and the desire to distribute the tax burden equitably, policymakers may be less inclined to reduce the corporate tax. However, recent research advances increasingly challenge the common perception that the corporate tax is a progressive tax on the affluent.
The modern globalized economy is characterized by ever more mobile capital. Increasingly, investment can flow to areas of lower taxation with greater ease than other factors. Other options being equal, an investor deciding between a high-tax jurisdiction and a low-tax jurisdiction will choose to invest in the lowest-taxed region. However, a worker cannot make the same decision. Labor is by nature less mobile than capital. A worker who lives in the low-tax jurisdiction will generally benefit as more capital flows to firms, buttressing labor productivity and, ultimately, wages. Conversely, workers in high-tax jurisdictions will see the capital in their firms diminish, harming productivity and, therefore, wages. This is a simplified narrative, but it illustrates the nature of corporate taxation in a global economy: Everyone bears the burden.