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1 Scott A. Hodge & Chris Atkins, U.S. Lagging behind OECD Corporate Tax Trends 1 (2006)

handle is hein.taxfoundation/ffffxz0001 and id is 1 raw text is: r:OuUNNDAT10N.
May 5, 2006
U.S. Lagging Behind OECD Corporate Tax Trends
by Scott A. Hodge and Chris Atkins
Fiscal Fact No. 55
Introduction
A wave of corporate income tax reduction is sweeping through many countries in the
Organization for Economic Cooperation and Development (OECD), but not the United
States. The latest to consider corporate income tax rate reductions are Australia, I
Germany,2 New Zealand,13 and Spain.4 Others, like Canada, are continuing to phase in
corporate rate reductions in 2006 and beyond.5 This movement transcends political
philosophy, with center-right (Australia), centrist ( Germany) and center-left (New
Zealand, Spain) governments all considering corporate income tax rate cuts.
As OECD countries continue to lower their corporate income taxes, they can expect to
reap more foreign direct investment from the U.S. A recent study by Deveraux and
Lockwood found that a 10 percent corporate rate reduction by an EU member-state can
reap a 60 percent short-run increase in investment by U.S. multinational corporations.6
While foreign governments entice U.S. investors by lowering their corporate tax rates,
the federal government in the U.S. stands pat with the same rate structure it has had since
1994. Indeed, one of the ironies of tax policy during the Bush presidency is that five
years of tax-cutting legislation have left the corporate income tax rate unchanged.
In the OECD, Only Japan Taxes Corporate Income at a Higher Tax Rate than U.S.
The United States has the second-highest overall corporate income tax rate (39.3 percent
combined federal and sub-federal) among all OECD countries (see Table 1). Japan (39.5
percent) and Germany (38.9 percent) have the first and third highest corporate income tax
rates, respectively. The nation with the lowest corporate income tax rate in the OECD is
Ireland (12.5 percent).

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