Wednesday, March 4, 2009

US Companies Pay the Highest Taxes in the World

Remember that businesses do not really pay taxes, their customers do.

By Chris Banescu
It may come as a surprise that US companies pay the highest taxes in the world. Yes, you read that right. American businesses, large and small and across all industries pay from 35% to 41.6% of their income in combined state and federal taxes. The 41.6% maximum rate is scheduled to rise to 46.2% in 2010 when President Obama's promised tax increases are implemented. Compare that to socialist France where companies pay only 34.4% in taxes, to China where the rate is 25%, or Russia which levies a mere 24%. Corporations in Ireland, Europe's fastest growing economy for the
last 18 years, pay just 12.5% in taxes.

Because of its dual taxation system, US businesses and individuals are required to pay both state and federal taxes on their income. When combined both these taxes range from a minimum of 35% in states like Nevada, South Dakota, and Wyoming that do not tax business income, to a maximum of 41.6% in Iowa, the state with the highest corporate tax rate of 12%.

Corporate Tax Rates, US vs. Other Free-Market Democracies

Last year the Tax Foundation, a nonpartisan educational organization with a solid reputation for independence and credibility, released a report that compared the tax rates of US corporations (across all 50 states) with 29 other countries that accept the principles of representative democracy and free-market economy (referred to as OCED countries, 30 total). Their study reveals the surprising finding that US companies are already at a significant competitive disadvantage in the world economy.

When compared to other OECD countries:

* 24 US states have a corporate tax rate higher than top-ranked Japan.
* 32 states have a corporate tax rate higher than third-ranked Germany.
* 46 states have a corporate tax rate higher than fourth-ranked Canada.
* All 50 states have a corporate tax rate higher than fifth-ranked France.

(The Tax Foundation, 2008)
The full chart comparing the various US tax rates versus all the other OCED countries is available here.

Based on gross domestic product (GDP) data from 2008, Japan was ranked as the world's second largest economy, Germany was the fourth largest, France was the fifth largest, and Canada was the eleventh largest economy. (CIA World Factbook on Wikipedia)

Among other surprises, all 50 US states have a combined corporate tax rate higher than even Italy, Spain, United Kingdom, Greece, Sweden, Norway, Finland, Austria, Switzerland, Denmark, Hungary, New Zealand, Australia, Mexico, Turkey, and South Korea. All 50 US states have higher tax rates than 27 of the other OCED countries.

When compared with companies based in Ireland with a 12.5% flat tax rate, US corporations that face an average 39.3% rate are taxed at 3.1 times Ireland's rate. When contrasted with Iceland (18%), Turkey (20%), Poland (20%), and Switzerland (21.3%) US companies pay roughly twice the tax rates of their foreign counterparts.

Even our cousins across the pond levy lower rates. The United Kingdom requires 30% in taxes while the US companies pay on average 39.3%; that's a 31% premium.

US Corporate Tax Rates Highest Among The World's Largest 15 Economies

The comparison doesn't stop with the OCED countries. US corporations compete in a global marketplace where many other non-OCED countries also operate. When looking outside the 30 free-market democracies that the Tax Foundation examined, things are just as ominous for American firms.

Based on the GDP data from 2008, some of the world's largest economies are also providing a tax environment much friendlier to businesses than the United States.

Communist China, the world's third largest economy, lowered its top corporate tax rate to 25% as of January 1, 2008. The new tax rate replaced the previous one of 33%.

Russia, the world's eighth largest economy, currently taxes its corporations just 24%.

Brazil, the world's tenth largest economy, taxes its companies a maximum 34% rate.

India, the world's twelfth largest economy, taxes its corporations at a rate of 33%.

The United States is the world's largest economy. When compared to the next 14 countries that represent the world's largest economies by GDP as of 2008, from the second largest (Japan) to the fifteenth largest (South Korea), the emerging patterns are striking:

* 24 US states have higher corporate tax rates than all 14 other countries.
* 32 US states have higher corporate tax rates than 13 of the 14 countries.
* 46 US states have higher corporate tax rates than 12 of the 14 countries.
* All 50 states have higher corporate tax rates than 11 of the 14 countries.

The full chart comparing all the US tax rates versus the world's largest economies is available here.

Raising Taxes Further on US Businesses

In the face of aggressive global competition and in spite of the considerable tax burdens they operate under, US businesses have somehow managed to prosper and grow and maintain America's prominence as the world's largest economy. Unfortunately, as the global competitive marketplace has expanded and countries like China, India, and Russia ramp up their economic might and move away from punitive corporate taxation, many of America's politicians are taking America in exactly the opposite direction.

In the midst of a serious global economic slowdown, with devastating reductions in corporate profits, accelerating business bankruptcies, and massive corporate layoffs, many state lawmakers are working to increase tax rates and fees on corporations and businesses. Concurrently, the White House and a majority of representatives in Congress are promising more tax increases and the elimination of many tax credits. Instead of helping US companies be more competitive and profitable and thereby allow the US economy to remain the job creating engine and economic driver of the world, our politicians are punishing and handicapping them. What could they be thinking?

2010 Corporate Tax Rate: US = 46.2%, China = 25%

Looking toward 2010, if President Obama and Congressional Democrats keep their promises, we will witness the once unthinkable: free-market America will tax its companies at 46.2%, almost double the rate of state-controlled China at 25%. As the world's largest economies continue to embrace lower corporate tax rates, a friendlier business environment, and greater prosperity for their people, the US will move backwards to the failed policies of the past, of punitive taxation and mediocre growth at best.

Obama tries to kill charities

Posted by bs (Profile)

Wednesday, March 4th at 9:00AM EST

We are all aware that Barack Obama is on the path to move the USA towards his vision of a socialist paradise. Hidden in Obama’s budget proposal is another plan to raise taxes - but this time it’s being done on the backs of those who are trying to help the needy and unfortunate: charities. His budget proposal calls for reducing the deductibility of charitable contributions for high-income taxpayers (> $250K/yr). The deduction would be limited to 28% instead of the 35% in place today.

The leftists who are in favor of this measure - yet another soak-the-rich strategy - piously claim that “they should give out of the goodness of their hearts and not for the deduction”. This is true, but it’s not reality and it’s not relevant. In reality, many give not only to benefit the charity, but also to get the writeoff. No matter what the motivation to give, this will inevitably impact charities by reducing that motivation. And this impacts not only the giver, but the charities that receive the donations.

Missouri Congressman Roy Blunt has been one of the more vocal Congressional critics of this part of the Obama budget. Last Friday Blunt sent a letter to Speaker of the House Pelosi to voice his displeasure with the charitable contribution hit job. In that letter, he states:

I am puzzled why this President – who has frequently called upon Americans to take responsibility for building their communities and institutions – would hinder many Americans from continuing to contribute voluntarily to our nation´s charitable organizations. These civic, educational, and faith-based organizations and groups are the backbone of our communities and can move quickly in times of crisis to react to the needs of the local, regional, and national communities they serve. We should be encouraging, not penalizing, the country´s good Samaritans during a time when millions of Americans are relying on their work more than ever.

(In 2005, Blunt championed a bill known as the “Charitable Giving Act” that sought to “provide incentives for charitable contributions by individuals and businesses” - one key aspect would have been to allow non-itemizers to deduct charitable contributions. That bill never passed out of committee)

But as bad as the financial implications might be, the social implications are even worse. Today the National Review’s Peter Wehner & Phillip Merrick published an article titled “An Assault on Authentic Compassion”. They point out how this measure belies the so-called “progressives” claims of “compassion” and “care for the poor” - in fact, it takes money away from them. But should we be surprised? Of course not - this is simply a continuation of the socialist policies of the Obama administration. Wehner & Merrick state:

The Obama administration’s unprecedented intrusion into the private sector betrays its underlying philosophy. In his speech before a joint session of Congress last week, the president declared that he doesn’t believe in bigger government. Oh yes he does, in ways we have never quite seen before.

With this proposal, President Obama is saying as directly as it can be said that the federal government is better able than private citizens and the charities they support to decide how these donation dollars are best distributed. Conservatives, by contrast, believe in the principle of subsidiarity — which in this instance means that charity is best performed at the most local and immediate level possible, and by “mediating” institutions rather than large, distant, and bureaucratic ones. This is not an abstract doctrine; it is based on the accumulated wisdom of the ages.

President Obama is willing to see private charitable giving to the poor decrease in order to see the scope and size of government increase. These are the actions of an ideologue, not a “pragmatist.”

Yes, indeed. Obama is simply revealing more of his left-wing, socialist/Marxist ideology and attempting to move the care of the needy to Mother Government and away from charities.

Take action today by writing to your Senator and Representative and voice your opposition to this move to socialize charity.

UPDATE: I am quite embarrassed that I missed Ben Domenech’s coverage of this story over at The New Ledger. Ben does a wonderful job of reviewing the situation, in a much less acerbic way than I did. I was glad to see that one of Ben’s sources saw the same Obama motivation that I did:

“This is a frontal assault on the non-profit sector aimed at undermining alternatives to government provision of social services. Nobody likes competition, and that goes for those who think government is the answer to all our problems.”

Ryan on Obama's Budget

March 3, 2009 Posted by John at 2:17 PM

Today the House Committee on the Budget held a hearing at which Peter Orszag, Director of OMB, testified. Paul Ryan of Wisconsin is the ranking Republican on the committee. His opening comments on the budget were, I thought, worth reproducing:

RYAN: Thank you, Chairman, and thank you for this hearing. I look forward to having a number of these hearings on this budget. What a week we just had last week. Let's go through it for a second. On Monday, we had the Fiscal Responsibility Summit. On Tuesday, we witnessed a very eloquent, ambitious and even inspiring speech by the president of the United States echoing those themes of fiscal responsibility. Then on Wednesday, Congress passed a bloated $410 billion spending bill with 9,000 earmarks. And on Thursday, we received the mother of all budgets, a truly sweeping transformation of the federal government, the likes of which we have not seen since the New Deal.

Finally, on Saturday, the president threw down the gauntlet. Rather than echoing the theme of changing the tone in Washington or bringing people together to forge a bipartisan compromise, he essentially said, "You're either with me or you're against me." He claimed opponents of this transformative budget are quote, "Tools of special interest and the powerful."

This is not changing the tone of Washington or forging a compromise. This is staking out an ideological conquest. It's playing the oldest political trick in the book, which is if someone disagrees with you impugn their motives. Don't debate the facts. Destroy their credibility and win the argument by default.

This power play strikes me as an incredible gamble with the U.S. economy and with those principles that built this country. Now the facts surrounding this budget are disturbing. It proposes to bring the size of our government to its largest level ever since World War II. It doubles the national debt in eight years. During a recession, it seeks to impose a $1.4 trillion tax in our economy on work, on savings, investment, energy, on manufacturing.

Even with the rosiest of economics assumptions, this budget never even comes close to achieving a balanced budget. During the time we have insolvency that goes permanently for Medicare and Social Security.

But what's most distressing about this budget is that it takes a decidedly ideological turn away from the principles that built this country and built this economy for the type of governing system we see in Europe that provides a kind of economic and social stagnation we have not seen here in America.

And I was asked this past weekend: What can Republicans do about this? Candidly, Republicans, we don't have the votes to really do anything about this. So I guess the question will become this year: Will all Democrats march in lock step with this vision, with this type of transformation?

Our goal, our role, our job, in the minority, is to give the American people the facts, is give the American people the truth, is to give the American people a good vigorous and civilized debate over this budget and to offer them a real choice and alternative, how we would do things differently and that is exactly what we intend to do while we have this vigorous debate and while we ask the tough questions.