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1 Chris Atkins & Scott A. Hodge, U.S. Still Lagging behind OECD Corporate Tax Trends 1 (2007)

handle is hein.taxfoundation/ffjgxz0001 and id is 1 raw text is: FOUNDATION July 24, 2007 U.S. Still Lagging Behind OECD Corporate Tax Trends by Chris Atkins and Scott A. Hodge Fiscal Fact No. 96 Introduction The United States has yet to catch the continuing wave of corporate income tax reduction sweeping through many countries in the Organization for Economic Cooperation and Development (OECD). Five countries cut their corporate income tax rates in 2006, and eight more, including Germany, will have cut their rates by January 1, 2008. As OECD countries continue to lower their corporate income tax rates, they can expect to reap more foreign direct investment from the U.S. A recent study by Devereux and Lockwood found that when an EU member state cuts its corporate rate by 10 percent, from 30 to 27 percent for example, it can expect to reap a 60-percent, short-run increase in investment by U.S. multinational corporations.' While foreign governments entice U.S. investors by lowering their corporate tax rates, the federal government in the U.S. has kept the same rate structure for 12 years. That makes the U.S. one of only two countries in the OECD not to reduce its corporate tax rate from 1994 to 2006, and one of only six OECD countries without a rate cut between 2000 and 2006. It is clear that the U.S. needs a new policy on corporate tax competitiveness, and with the OECD average corporate tax rate steadily declining, the need for a new policy becomes more pressing with each passing year. In the OECD, Only Japan Taxes Corporate Income at a Higher Tax Rate than the U.S. Japan has cut its rate recently, and its 39.5 percent rate now barely claims the world's title of highest corporate tax rate, just above the 39.3 percent in the United States (see Table 1).2 Germany is one of several countries that had higher tax rates than the U.S. in 2000 but now levy a lower tax (38.9 percent). Ireland has the OECD's lowest rate at 12.5 percent.