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1 Erica York, et al., Comparing the Corporate Tax Systems in the United States and China 1 (2022)

handle is hein.taxfoundation/cprtecpt0001 and id is 1 raw text is: Comparing the Corporate Tax Systems in the United States and China FISCAL FACT No. 791 May 2022 Erica York Alex Durante Alex Muresianu Senior Economist, Research Manager Federal Tax Economist Federal Policy Analyst The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and global levels. We are a 501(c)(3) nonproft organization. ©2022 Tax Foundation Distributed under Creative Commons CC-BY-NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Key Findings • Federal policymakers are debating a legislative package focused on boosting U.S. competitiveness vis-a-vis China; however, it currently contains little to no improvements to the U.S. tax code. • The existing U.S. tax code is biased against capital investment and it is scheduled to worsen over the next decade. The tax bias against domestic investment would further worsen if tax increases included in President Biden's budget proposal were enacted. • The federal corporate income tax rate in the United States is currently 21 percent, and rises to 25.8 percent when factoring in the average state and local corporate tax rates. Profits earned from highly immobile intangible assets to support exports face a lower tax rate (13.125 percent) due to the deduction for Foreign-Derived Intangible Income (FDII). The headline corporate tax rate in China is 25 percent, and lower rates of 5 percent to 15 percent apply in certain districts. • The marginal effective tax rate (METR) in the United States under current law is 18.3 percent, compared to 4.8 percent in China, indicating the U.S. places a higher burden on marginal investment than China. • Within the realm of fiscal policy, rather than focus on providing subsidies to specific U.S. industries, lawmakers should consider improving the baseline tax treatment of domestic investment to boost U.S. competitiveness with China and other countries.

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