We’ve heard it hundreds of times: the U.S. has the highest corporate income tax rate in the developed world.
Combining the federal and weighted average state corporate income tax rates gives U.S. companies a 39% statutory rate.
However, companies don’t really pay that.
“[T]he S&P 500 median effective rate of 30% is almost 10 percentage points below the statutory rate,” wrote Goldman Sachs’ Amanda Sneider. “Over the last 10 years, fewer than 10% of S&P 500 firms have paid the statutory rate or higher.”
The U.S. extremely complicated tax code is riddled with loopholes that allow businesses to enjoy lower rates.
But in its effort to reign in deficits and debt, the government may get more aggressive about ending that party.
“The tax preferences that create the gap between effective and statutory rates will likely receive scrutiny from policymakers as they attempt to reform the tax code,” said Sneider. “By closing the gap between effective and mandated tax rates, the government could raise revenues while lowering the statutory rate, thus presenting the change as a tax cut.”
Here’s the chart from Goldman.
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