Ordinarily, I probably wouldn’t blog about another country cutting its corporate income tax rate. But when that country was the last one standing between the U.S. and the industrialized world’s highest such rate, well …
From the New York Times:
TOKYO — Japan will cut its corporate income tax rate by 5 percentage points in a bid to shore up its sluggish economy, Prime Minister Naoto Kan said here Monday evening.
Companies have urged the government to lower the country’s effective corporate tax rate — which now stands at 40 percent, around the same rate as that in the United States — to stimulate investment in Japan and to encourage businesses to create more jobs.
Lowering the corporate tax burden by 5 percentage points could increase Japan’s gross domestic product by 2.6 percentage points, or 14.4 trillion yen ($172 billion), over the next three years, according to estimates by Japan’s Trade Ministry.
Did you notice that line, “which now stands at 40 percent, around the same rate as that in the United States”? What the story didn’t say, and what you need to know to get the full implication of Japan’s move for us, is that only Japan’s rate was higher than ours — meaning ours could soon be the highest in the industrialized world? (The federal corporate tax rate in the U.S. is 35 percent, but state corporate taxes push the average in this country up to about 40 percent.)
Let’s hope this move spurs Washington to take up the various proposals to, among other things, simplify the tax code for corporations and lower the statutory rate to a competitive level.
(H/t: Dan Mitchell)
– By Kyle Wingfield
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