As part of a cascade of tweets Wednesday night, President Donald Trump said one of the major incentives for tax reform was making the US more competitive with the rest of the world.
As an example, the president pointed to China’s headline corporate tax rate.
“China has a business tax rate of 15%. We should do everything possible to match them in order to win with our economy. Jobs and wages!” he tweeted.
But Trump’s tweet misstated the headline corporate tax rate in China.
According to accounting firm PWC, the actual corporate tax rate in China is 25%. That remains above the US federal government’s 35% rate.
PWC noted that the rate for “industries encouraged by the China government,” such as high tech industries, is 15%.
In the US, businesses are subject to the 35% rate but can claim a slew of deductions that drive their tax bills lower. For instance, the average S&P 500 company already pays an effective tax rate somewhere in the mid-20s.
Trump’s push for a 15% rate in his massive tax overhaul appears to be an increasingly futile effort. Republican leaders from House Speaker Paul Ryan to Treasury Secretary Steven Mnuchin have acknowledged that due to budgetary constraints, the corporate rate will likely end up in the low- to mid-20s as part of the proposed tax overhaul.
That would place the US right around China’s rate.
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