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• Biden’s proposed new tax rate for corporations would be either the top rate or in the top one-fifth of rates, depending on which metric you use.
Would President Joe Biden’s corporate tax rate proposal get the United States in tune with other major countries? Or would it make the U.S. the top corporate taxer among that group?
Democrats and Republicans are at loggerheads on that question, as Biden proposed using a corporate tax hike as a way to pay for his infrastructure plan.
Biden wants to raise the federal tax rate on corporations from 21% to 28%. That increase would leave the rate lower than 35% it was before President Donald Trump signed a tax law in 2017.
Republicans argue that an increase to 28% would leave the United States at a competitive disadvantage. Sen. Joe Manchin of West Virginia, a moderate Democrat whose support will be needed to pass any such bill, has already said he opposes any increase beyond 25%.
During an appearance on CNN’s "State of the Union," Energy Secretary Jennifer Granholm made the case for Biden’s 28% target.
"You recall that, just a few years ago, the tax rate for corporate taxes was 35%, and when Donald Trump passed his corporate and tax cuts for the wealthy package, he dropped it to a point that nobody was even asking for, which was 21%," Granholm said during the April 4 interview. "So, what Joe Biden is saying is, let's put it to a reasonable middle. Let's put us in line with other industrial nations, which is at 28%."
We looked at whether Biden’s proposal would "put us in line with other industrial nations" on corporate taxation. The reality is that the new U.S. rate would be either the top rate or in the top one-fifth of rates, depending on which metric you use.
To make the most complete county-to-country comparisons, experts generally look at a country’s national corporate tax rate plus a weighted average of tax rates for its sub-national units. (In the case of the U.S., that would be states that have corporate income tax rates.)
While the national rate under Biden’s plan would be 28%, experts have calculated that the national plus sub-national rate would average out to 32.34% under the proposal.
We looked at both measurements, using data compiled by the Organization for Economic Cooperation and Development, or OECD, a group of 38 economically advanced nations that is often used as a proxy for the "industrial nations" to which Granholm was referring.
Using the more expansive tax rate — national plus sub-national corporate taxation — enactment of Biden’s proposal would put the United States highest in the rankings of advanced nations for corporate taxation. The closest would be Portugal, with a 31.5% combined rate.
By this standard, Granholm is wrong.
By comparison, the United States’ current 25.76% combined corporate tax rate ranks a little higher than the median for advanced countries.
Here’s the full list:
Biden’s proposal "would put us at the top of the OECD, though only slightly above some of the other major economies," said Eric Toder, the co-director of the Urban Institute-Brookings Institution Tax Policy Center.
Taking an even more elite selection of world economies, the Group of Seven industrial nations, the proposed rate would also rank No. 1.
The United States’ 32.34% combined rate would exceed that of Germany (29.9%), Japan (29.74%), Italy (27.81%), Canada (26.47%), France (25.83%), and the United Kingdom (19%).
Looking at the national rate by itself changes the equation somewhat, but the United States remains near the top of the OECD rankings.
Biden’s proposed 28% rate would be tied for seventh among the 38 nations, behind Australia (30%), France (32%), Colombia (32%), Costa Rica (30%), Mexico (30%), and Portugal (30%), and tied with New Zealand (28%).
In other words, the U.S. would rank in the top one-fifth of OECD nations.
By comparison, the United States’ current national corporate tax rate of 21% would be a better fit for the phrase "in line" with other industrial nations, as Granholm put it. The current 21% rate puts the United States broadly in the middle of the pack.
As for the G-7, the United States’ 28% national rate would rank second to France (32%) and ahead of Italy (24%), Japan (23.2%), United Kingdom (19%), Germany (15.8%) and Canada (15%).
Granholm’s office focused on the national rate, arguing that national policy is the only thing the administration can control, and said it considers being tied for seventh in the OECD to be roughly in line with other industrialized countries.
They added that, according to the Peter G. Peterson Foundation, the United States has the lowest share of its GDP stemming from corporate taxation of any of the G-7 countries. That’s due in part to the United States’ current rate being the lowest of the G-7 countries except the United Kingdom.
Granholm said Biden’s corporate tax rate increase would "put us in line with other industrial nations."
Using the most expansive measure, a combination of the national and sub-national rates, the United States after enactment of Biden’s proposal would actually rank the highest of any of the 38 countries in the OECD, which is often used as a proxy for leading industrial nations.
Using just the national rate, the U.S. would rank below Australia, France, Colombia, Costa Rica, Mexico and Portugal, and would be tied with New Zealand (28%). But that would still be in the top one-fifth of advanced countries.
We rate the statement Mostly False.
Jennifer Granholm, appearance on CNN’s "State of the Union", April 4, 2021
Tax Foundation, "Corporate Tax Rates around the World, 2020," Dec. 9, 2020
Tax Foundation, "President Biden’s Infrastructure Plan Raises Taxes on U.S. Production," March 31, 2021
Tax Foundation, "Evaluating Proposals to Increase the Corporate Tax Rate and Levy a Minimum Tax on Corporate Book Income," Feb. 24, 2021
Organization for Economic Cooperation and Development, "Corporate Tax Statistics Database," accessed April 6, 2021
Urban Institute-Brookings Institution Tax Policy Center, Briefing Book, accessed April 6, 2021
Peter G. Peterson Foundation, "Six Charts That Show How Low Corporate Tax Revenues Are in the United States Right Now," April 1, 2020
Email interview with Elke Asen, policy analyst with the Tax Foundation, April 5, 2021
Email interview with Eric Toder, the co-director of the Urban Institute-Brookings Institution Tax Policy Center, April 6, 2021
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