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At a thank-you rally in West Allis, Wis., a month after his election win, President-elect Donald Trump pledged historic tax reform. (Milwaukee Journal Sentinel/Rick Wood) At a thank-you rally in West Allis, Wis., a month after his election win, President-elect Donald Trump pledged historic tax reform. (Milwaukee Journal Sentinel/Rick Wood)

At a thank-you rally in West Allis, Wis., a month after his election win, President-elect Donald Trump pledged historic tax reform. (Milwaukee Journal Sentinel/Rick Wood)

Tom Kertscher
By Tom Kertscher December 15, 2016

Pledging cuts, Donald Trump says at Wisconsin rally that U.S. has highest corporate tax rate

During a speech in which he warmed up to U.S. House Speaker Paul Ryan, gave a shout-out to Vince Lombardi and even name-dropped Kanye West, president-elect Donald Trump also reaffirmed his promise to cut taxes.

Trump appeared Dec. 13, 2016 with vice president-elect Mike Pence and a host of Badger State Republicans, including Ryan, at the Wisconsin State Fair Park Exposition Center. This stop on his multi-state "thank-you tour" was mostly a campaign-style rally, but there was some policy, too.  

Midway into his remarks, Trump said:

"We’re going to undertake one of the great tax reforms and simplifications in American history. This includes a massive tax cut for the middle-class and middle-class families from Wisconsin, too.

"We’re also going to lower our business tax rate so that new companies will come to our shores and hire workers in cities like right here. Is that OK? That’s what we want. We’re going to bring our rates down from 35 percent, we’re going to try to get it down to 15 percent. So, right now -- and by the way the jobs will pour in -- so, right now, we’re the highest-taxed nation in the world. And when we finish, we’ll be one of the lower taxed, one of the lower."

Whether the president-elect keeps his promises on taxes will be something to be determined by PolitiFact National’s Trump-O-Meter, which will be launched in 2017.

But we can answer now whether America’s business tax rate is the highest in the world.

Top U.S. rate: 35%

The corporate income tax rates in the United States range from 15 to 35 percent. And that 35 percent top rate -- at least as a "statutory" rate (more on that below) -- is relatively high.

The Paris-based Organisation for Economic Co-operation and Development publishes the top corporate tax rates for the 35 countries that belong to its organization, which includes most advanced, industrialized nations.

The U.S’ top rate of 35 percent ranks first, just ahead of France, 34.4 percent; Belgium, 33 percent; and Australia and Mexico, 30 percent. On the low end: Switzerland, 8.5 percent; Ireland, 12.5 percent; Latvia and Canada, 15 percent; and Germany, 15.8 percent.

Sometimes references are made to a combined corporate tax rate, which includes federal and state corporate taxes; the U.S.’ combined rate is 38.9 percent. But Trump was referring to the 35 percent federal rate, the one he vows to reduce.

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There are, however, two clarifying points to make.

Other nations, and what is paid

To back Trump’s statement, his campaign cited a Forbes article that noted the United States has the highest corporate rate among industrialized nations. But Trump didn’t limit his statement to industrialized nations.

The accounting firm PwC tracks the top federal corporate tax rates for 155 countries. That list shows five other countries that also have a top rate of 35 percent: Argentina, Chad, Congo, Malta and Zambia.

And there are two countries with higher top corporate tax rates: United Arab Emirates, 55 percent; and Puerto Rico, 39 percent.

It also needs to be understood that America’s 35 percent top rate is the statutory rate -- before deductions -- but U.S. companies aren’t actually taxed at that rate. Tax deductions -- on health insurance, pensions and investment returns, for example -- allow corporations to reduce the pool of taxable profits.

Indeed, a March 2016 report by the U.S. Government Accountability Office found that in each year from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability, although larger corporations were more likely to owe tax.

And a May 2016 paper by Reed College economics professor Kimberly Clausing found U.S. multinational firms have used tax planning to generate effective tax rates "that are far lower than the statutory rate, and often in the single digits."

Our rating

Trump said America’s federal business tax rate is the highest "in the world."

The top corporate tax in the United States is 35 percent, highest among the world’s industrialized nations. But five smaller nations have the same rate and two smaller ones, United Arab Emirates and Puerto Rico, have rates above 35 percent.

Also, the 35 percent U.S. rate is only the starting point, given that corporations can use exemptions and deductions to effectively reduce that rate and pay lower taxes.

For a statement that is accurate but needs clarification, our rating is Mostly True.

https://www.sharethefacts.co/share/077f53a2-c756-458f-b4f3-4f872d820085

Our Sources

CSPAN, video (28:00) of Donald Trump speech, Dec. 13, 2016

Email, Donald Trump spokesman Steven Cheung, Dec. 13, 2016

PolitiFact National, "For the third time, Donald Trump, U.S. is not 'highest taxed nation in the world,’" May 8, 2016

Forbes opinion column, "The Truth About Corporate Tax Rates," March 25, 2015

PunditFact, "Does the U.S. have the highest corporate tax rate in the free world?" Sept. 9, 2014

Organisation for Economic Co-operation and Development, 2016 corporate income tax rates, accessed Dec. 14, 2016

PwC, United Arab Emirates corporate taxes, Aug. 10, 2016

PwC, corporate income tax rates, Dec. 14, 2016

U.S. Government Accountability Office, "Most Large Profitable U.S. Corporations Paid Tax but
Effective Tax Rates Differed Significantly from the Statutory Rate,"
March 2016

PwC, Puerto Rico corporate taxes, June 1, 2016

Email, Tax Policy Center Sol Price Fellow Roberton Williams, Dec. 14, 2016

Email, American Enterprise Institute tax scholar Alan Viard, Dec. 14, 2016

Email, American Enterprise Institute economic policy research assistant Cody Kallen, Dec. 14, 2016

Email, Tax Policy Center co-director Eric Toder, Dec. 14, 2016

Washington Center for Equitable Growth, "Profit shifting and U.S. corporate tax policy reform," May 10, 2016

Email, Center on Budget and Policy Priorities chief economist Chad Stone, Dec. 14, 2016

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More by Tom Kertscher

Pledging cuts, Donald Trump says at Wisconsin rally that U.S. has highest corporate tax rate

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