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ACT Tax Facts: A 20% U.S. Corporate Tax Rate is Vital to Global Competitiveness

  • Some have suggested a 22 percent corporate tax rate would allow the United States to compete for corporate headquarters, investment, and jobs in today's global economy because it is below the 23.8 percent average corporate tax rate of other OECD countries.
  • This comparison ignores the fact that, in addition to the taxes they pay the federal government, U.S. companies pay an average 6 percent state and local income tax rate which results in a combined 26.7 percent effective tax rate (after deductibility against the federal rate), nearly 3 percentage points higher than the average for the OECD countries in 2017. Moreover, nine OECD countries have announced corporate tax rate reductions which, when effective, would leave the U.S. with a corporate tax rate nearly 4 percentage points higher than the OECD average.
    • At a U.S. federal corporate tax rate of 22 percent (26.7 percent including state-level corporate taxes), nearly three-fourths of OECD countries would have a lower combined rate than the United States in 2020.
  • Companies make their investment decisions based on the tax rates in the specific countries where the investments will be made and compete against foreign companies that are based in those countries.
    • A 26.7 percent U.S. rate (including state and local income taxes) would be nearly 10 percentage points higher than best-in-class countries like the United Kingdom, which will reduce its 19 percent corporate tax rate to 17 percent in 2020.
  • A high U.S. corporate tax rate makes foreign locations more attractive for investment and job creation.
    • A corporate tax rate higher than 20 percent would not provide a level tax playing field with our international competitors, resulting in slower economic growth, less investment and fewer jobs in the United States. Higher corporate rates result in lower wages for U.S. workers and have led to a loss of U.S. companies. A 20 percent corporate rate is vital for U.S. competitiveness.

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