The United States: corporate tax that is substantially higher
With an average corporate income tax rate of 38.9% (federal tax rate of 35% + state income tax), the United States has one of the highest corporate income tax rates in the OECD and the 3rd highest worldwide. The average corporate income tax rate in 188 countries is 22.5%, or 29.5% if the rate in each country is weighted by its economic power (GDP weight):
Over the past 10 years, the difference in tax burden between the United States and the rest of the world has sharply increased. The global average has fallen from 34.1% to 29.5% while US corporate tax rate has remained unchanged. Asia is where the reduction in tax has been the most dramatic (with the average rate falling from 31% in 2003 to 20% in 2016).
However, in practice, US businesses benefit from exemptions and deductions that significantly reduce their effective tax rate. In particular, companies that relocate do not pay taxes as long as income is not repatriated to the United States. The effective tax rate for US companies does not exceed 27%, i.e. a level lower than the average effective tax rate of the OECD countries (27.7%).
This is what the proposed reform seeks to remedy by proposing a tax rate lower than the average tax rate of the OECD countries, while limiting the impact on the US Treasury’s revenue thanks to the broadening of the tax base.