Reply #29: That still doesn't explain why [View All]

[ProSense]

U.S. companies should benefit from loopholes that allow some to pay an effective tax rate of as little as 4.5 percent. China and India have higher rates.

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We found that for 2010, the U.S ranked second to Japan by a fraction of a percentage point -- 39.54 percent for Japan to 39.21 percent for the U.S. But that figure is already outdated: Japan has moved to cut its rate for 2011 by 5 percentage points, leaving the U.S. with the highest corporate tax rate among OECD nations.

Still, the issue is complicated, so let’s delve a bit deeper.

The OECD rate is the "statutory" rate -- that is, the top corporate tax rate on the books. But as Obama indicated, many companies pay considerably less than that, due to deductions and other exclusions. Adjusting for these factors produces a statistic called the "effective tax rate."

The World Bank has assembled data from 183 nations and made a series of statistical adjustments to produce a full international comparison of effective tax rates. By this measurement, the U.S. rate is considerably lower than the published rate -- 27.6 percent. But in a comparative sense, that's still pretty high: Among larger international economies, only Japan, New Zealand and Thailand imposed a higher effective rate, according to the World Bank study. And Japan's number should fall by the time next year's study comes out.

The World Bank also produces another -- and broader -- statistic. This measure factors in not only the corporate profit tax but also a range of other taxes paid by businesses, including the cost of employee taxes borne by the employer. When the World Bank ranked countries from the lowest level of taxes to the highest, the U.S. ranked 124th out of 183 -- meaning corporate taxes were relatively high. A number of other large and/or democratic countries were higher, including Austria, Belgium, Brazil, China, France, Hungary, India, Italy, Spain and Sweden.

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