This Huge Slide Shows Why The US Corporate Tax System Is An Unmitigated Disaster

Corporate tax reform is a hot issue that both Democrats and Republicans seem to favour.

The basic idea: Lower the main rate, and get rid of loopholes.

In short, get rid of the complexity and all the market distortions buried in that complexity.

It seems hard to argue with, especially when you see this slide from a presentation from Nomura’s Lewis Alexander.

There are two great charts in it.

The one on the left shows the number of tax code provisions that expire each year, and can only continue with Congressional approval. Since Congressional approval is never a sure thing, the ongoing increase is a source of more and more uncertainty.

The chart on the right shows the gap between the official statutory tax rate, and the actual rate that corporations play. The difference between the statutory rate and the effective rate reflects the various tricks and loopholes that  that companies can use to whittle down their bill.

The fact that the US has the highest gap is further proof of US corporate tax complexity.

tax code

Photo: Nomura

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