The Coporate Tax Rate

In a previous article, I discussed the fact that an "expert" averred in an article published in the Austin American-Statesman that the United States had the second highest corporate tax rate in the world and that, in fact, this was not true. There were, in fact, at least six other countries with higher corporate tax rates than the United States.

At the time, I refused to discuss whether the U.S. corporate tax rate was too high. I wanted to stay on the point that this "expert" had said something which wasn't true, and which he almost surely knew wasn't true, and that the American-Statesman had published his article without the most rudimentary checking of his "facts," thereby putting and perhaps perpetuating a falsehood into the public discourse about U.S. corporate tax rates.

Now I want to talk about whether U.S. corporate tax rates are "too high."

The U.S. corporate tax rate is actually a range, depending on the income level of the corporation paying the taxes. That range is from 15% to 39%. Is that too high?

I don't know that I'm qualified to answer that question, but I have an opinion. That opinion is informed, at least in part, by this fact: According to NPR, the actual rate of tax paid by corporations in the United States on average is between 12 and 13%.

I need to say that again: the average rate of tax actually paid by corporations in the United States is between 12 and 13%.

That doesn't seem too high to me. Especially when corporations are making record profits and that's lower than the rate of taxes I pay. A lot lower.

So, in addition to making a false statement about U.S. corporate tax rates compared to other nations corporate tax rates, the "expert's" statement was really misleading. Regardless of what the stated corporate tax rate is, the actual rate of taxes paid by corporations in the United States falls below the lowest rate in the stated range of corporate taxes.

Why? I am not suggesting that U.S. corporations are cheating on their taxes, though a number of them have plead guilty to that crime over the years. Maybe they're cheating, maybe they're not. I tend to think most of them aren't.

They pay an average rate lower than the lowest rate of the stated range because of all the deductions, exemptions, and credits of which they may legally avail themselves in the U.S. tax code. So, it is actually our tax law that allows them to pay such a low rate.

My suggestion is that, when we are evaluating whether corporations pay too much in taxes in the United States, that we look at what they actually pay under our tax law, not what they might pay if their accountants were stupid and they paid more than the law requires them to pay.

Twelve to 13% doesn't seem too high to me.