US Has One of the Highest Corporate Income Tax Rates of All Advanced and Emerging Large Economies

The United States is considering lowering its statutory corporate income tax rate, which at 35 percent is one of the highest among advanced and large emerging economies. The average rate among these countries is 24 percent, compared to 49 percent among countries in the Organization for Economic Cooperation and Development (OECD) in 1986. Countries have been dropping rates to attract investment and jobs, and companies shop globally for the best deal. The average US effective corporate tax rate, what companies end up paying after tax benefits, is lower than the statutory rate but still around 30 percent for American firms that compete internationally. Studies show higher rates significantly discourage corporate investment and entrepreneurship, but politicians face many challenges with overhauling taxes, especially negotiating changes with bipartisan support.

This PIIE Chart is adapted from Simeon Djankov’s policy brief, Trends in Tax Reform in Advanced and Large Emerging Economies (forthcoming).