Starting Next Month, the U.S. Will Have the Highest Corporate Tax Rate in the World

On April 1, Japan will cut its corporate tax rate to 36.8 percent from 39.5 percent.

You know what that means, right?

This means that the United States will officially have the highest corporate tax rate in the world, with average combined federal and state profit levies of 39.2 percent.

“Yes, that’s higher than Sweden,” The Wall Street Journal reports. “Higher than Russia. And China, Mexico, Denmark and even France. Doesn’t it make you want to break out in a chant: U-S-A, U-S-A?”

As Japanese politicians found themselves staring down an increasingly burdensome deficit and an aging population, they came up with an idea: Cut the corporate profits tax to boost economic activity and generate higher revenues.

“The government approved an overall five percentage-point cut, which was delayed by last year’s earthquake and tsunami,” the Journal reports. “But the first installment arrives April 1 and in three years the rate will drop another 2.3 percentage points to 34.5 percent.”

The Journal report continues:

Japan‘s neighbors in Asia convinced Tokyo to act by luring investment from what used to be the world’s second-largest economy and is now the third, after the U.S. and China. Korea has cut its top corporate rate to 22 percent, Taiwan to 17 percent and Thailand is moving to 20 percent over the next two years. Hong Kong and Singapore have led the way with longstanding rates of 16.5 percent and 17 percent, respectively.

Japan is the latest country to act on the reality that high corporate taxes create “economic distortions.”

US falls to 5th in global competitiveness

The U.S. has tumbled further down a global ranking of the world’s most competitive economies, landing at fifth place because of its huge deficits and declining public faith in government, a global economic group said Wednesday.

The announcement by the World Economic Forum was the latest bad news for the Obama administration, which has been struggling to boost the sinking U.S. economy and lower an unemployment rate of more than 9 percent.

Switzerland held onto the top spot for the third consecutive year in the annual ranking by the Geneva-based forum, which is best known for its exclusive meeting of luminaries in Davos, Switzerland, each January.

Singapore moved up to second place, bumping Sweden down to third. Finland moved up to fourth place, from seventh last year. The U.S. was in fourth place last year, after falling from No. 1 in 2008.

The rankings, which the forum has issued for more than three decades, are based on economic data and a survey of 15,000 business executives.

The forum praised the U.S. for its productivity, highly sophisticated and innovative companies, excellent universities and flexible labor market. But it also cited “a number of escalating weaknesses” such as rising government debt and declining public faith in political leaders and corporate ethics.

Read more here.

Our future hinges on .. oil subsidies and jet loopholes?

The Obama administration wants to clarify that it definitely wants to end the Bush tax cuts, raising taxes on filthy rich American small business owners earning over $250,000 a year… it just doesn’t want to do that quite yet. Right now our Dear Ruler, Barack Obama, and the Democrats just want to target “millionaires and billionaires, oil and gas subsidies, and loopholes for corporate jets that are gifts to special interests,” according to chief dogwasher Jay Carney. He says, “This is about subsidies for oil and gas companies — $40 billion — a loophole that allows for the owners of private corporate jets to benefit enormously in the billions, compared to, say, Delta or American Airlines, and other measures that benefit millionaires and billionaires, or in some way, you know, complicate our tax code in a way that it isn’t helpful.” It’s funny how Barack Obama and the Democrats are only worried about our “complicated” tax code as it applies to wealthy folks.

Let’s start with this focus on loopholes for corporate jets. Why the focus on corporate jets? Simple .. playing the wealth envy card. There are two things that really seem to symbolize extreme wealth: yachts and private jets. Democrats tried a special tax on yachts years ago, and thousands of jobs in the boat-building industry were lost. The tax was soon repealed. So .. this time it will be the private jets. And just what hideous subsidies are the Democrats after? Depreciation. All businesses get to depreciate their capital equipment. There is nothing really sexy – nothing that can be exploited to play the wealth envy game – in taking a depreciation for a construction crane or a massive new printing press at The New York Times. Private Jets? Well that’s an entirely different matter — only rich people fly in private jets, so have at ‘em!

In reality, how much could closing the corporate jet loophole really gain the taxpayers? Well when you consider the fact that we have a $1.6 trillion deficit just this year, you’d have to be government-educated to think that this corporate jet loophole could even make a dent in that figure. The reason why Democrats are focusing on something like this is because they are pandering to the dumb masses … like this person, for example: Robert Creamer. Here’s a taste of an article he wrote for the Huffington Post:

High-end corporate jets can set you back for from $40 to $70 million. They offer huge seats, communications suites, luxury appointments — convenience that is unmatched by flying commercial. But should the other taxpayers really be subsidizing that kind of luxury travel?

If a corporation spends $40 million on a corporate jet to fly around its CEO without the hassle of airport security, and the other indignities suffered by mere mortals, is it right to require those mere mortals contribute as much as $14 million in the form of a tax subsidy for the deduction the company will take as the aircraft is depreciated over the years?

The entire article is dripping in this wealth envy attitude. The Democrats play into that because they know it works.

The other victim in the Democrat wealth-envy parade is Big Oil. So now we are back to these oil and gas subsidies. We’ve been through this charade before, and in fact, I’ve pointed you to an excellent article by Randall Hoven in the American Thinker, which gives you some of the details on these hideous subsidies … subsidies that are almost uniformly offered to all industries in this country. What makes Big Oil subsidies different and worthy of government lambasting? Nothing, other than the fact that Big Oil makes for a convenient boogie man in a sea of ignorance. OK .. for some figures:

* Domestic manufacturing tax deduction — $1.7 B. This is a tax deduction given to every manufacturer in the US. Per CNN, it was “designed to keep factories in the United States.” If that deduction were eliminated for oil companies only, it would mean singling out oil companies from all other manufacturers.

* Percentage depletion allowance — $1 B. Any industry can write down a portion of the cost of its capital equipment as part of the cost of doing business. Right now, oil in the ground is treated as capital equipment. Again, this “subsidy” amounts to how the cost of doing business is defined. All companies get it, not just oil companies.

* Foreign tax credit — $850 million. Companies get credit for taxes they pay to other countries. All companies get this “subsidy,” not just oil companies. Should a company pay tax on tax? Should only oil companies pay tax on tax?

* Intangible drilling costs — $780 million. According to CNN, “[a]ll industries get to write off the costs of doing business, but they must take it over the life of an investment. The oil industry gets to take the drilling credit in the first year.” Among these four tax “breaks,” this smallest one was the only one that treated oil companies differently.

As Randall Hoven, the author of the American Thinker article, points out … the only subsidy that is specific for the oil industry is the last one for intangible drilling costs. So $3.55 billion that the Democrats want to claim are tax credits that are offered to all industries and manufacturers in the United States. But what if Barack Obama and the Democrats get their way in these debt talks and eliminate these subsides? Is this really going to make a dent in tackling our debt? Hoven has the figures …

* The amount of earnings not collected in taxes is about $4.3 billion per year — about 0.2% of this year’s deficit and enough to fund about 10 hours of current US government spending.

The only tax in which the oil industry seems to get special treatment compared to other industries is intangible drilling costs. The amount of that subsidy? That would be $0.78 billion per year — enough to fund less than two hours of federal spending in 2011, and not even half the amount we are lending a foreign-owned and state-owned oil company for drilling offshore Brazil.

3M May Leave Country Because of Obama Regulations

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The head of one of the US’s biggest industrial groups has launched a scathing attack on Barack Obama’s attempts to repair relations with companies, dubbing him “anti-business”.

Manufacturers could shift production out of the US to Canada or Mexico as a result, warned George Buckley, chief executive and chairman of 3M.

“I judge people by their feet, not their mouth,” he told the Financial Times. “We know what his instincts are – they are Robin Hood-esque. He is anti-business.”

The Obama administration has struck a more conciliatory tone towards business since the Democratic defeat in November’s midterm elections.

Last month, the president created a jobs and competitiveness council, chaired by Jeffrey Immelt, chief executive of GE, and including chief executives such as American Express’s Kenneth Chenault, DuPont’s Ellen Kullman, Antonio Perez of Kodak and Southwest Airlines’ Gary Kelly. Mr Obama also convened a meeting this month with technology chief executives, including Steve Jobs of Apple, Google’s Eric Schmidt, Oracle’s Larry Ellison and Mark Zuckerberg of Facebook.

Mr Buckley, who has run the diversified manufacturer since 2005, said: “There is a sense among companies that this is a difficult place to do business. It is about regulation, taxation, seemingly anti-business policies in Washington, attitudes towards science.”

He added: “Politicians forget that business has choice. We’re not indentured servants and we will do business where it’s good and friendly. If it’s hostile, incrementally, things will slip away. We’ve got a real choice between manufacturing in Canada and Mexico – which tend to be pro-business – or America.”

The 3M chief also criticised US immigration policy, saying the difficulty of obtaining visas was forcing companies to move research and development overseas. “About 68 per cent of our science PhD candidates are from outside the US,” he said. “Many want to stay here afterwards but we’re not allowed as many visas as we would like.”

“We are now exporting science overseas to China, India, Germany, building labs there. There’s a good strategic reason for it, but we also have no choice – if we can’t get the people here and we’re competing with the people there, we have no choice but to do it locally.”

Mr Buckley struck a gloomy note on the US economy. “The macro numbers seem to be improving but when we look at the micro numbers – at what’s going on in housing, automotive, in manufacturing in general – it’s hard to get enthusiastic about it,” he said.

Canada Slashes Corporate Tax Rates

American lefties typically gaze northward with envy at Canada’s high taxes, socialized medicine (never mind the waiting lists and Canadians fleeing southward for quick access to technology unavailable at home), and higher-density, mass transit-dependent cities. But The Canadians have figured out something that eludes American progressives: taxing corporations is a silly way to raise revenue for the state, as it hinders job creation,

Phred Dvorak writes in the Wall Street Journal:

Canada’s government says the cuts and other business-attracting measures should bring more investment to the country. Economists say it’s tough to figure out what the actual effects of such moves are, though some companies say Canada’s relatively low taxes and stable financial and regulatory environment swayed their decisions to move operations and capital north.

It would be much better for America to cut its corporate tax rate to zero, which would spark an immediate wave of investment. Tax the resulting wealth when it is received by actual human beings, rather than at the level of job-creating legal entities. Better yet, tax the wealth when it is spent on consumption. The resulting boom will enrich everyone, though it will disappoint those who preach class envy as the basis for politics.

Taxing corporations is like taxing seed corn. It can only have the effect of hindering the creation of new wealth.

Murphy Outlines Three-Year Plan to Eliminate Maryland’s Corporate Income Tax….

….Proposes Reductions in Personal Income Tax

Crofton, Maryland – Brian Murphy, Republican candidate for governor of Maryland, continues to propose solutions to grow Maryland’s economy. Today he laid out a proposal to eliminate Maryland’s high 8.25 percent corporate income tax. In spite of Maryland’s ideal location and talented workforce, unemployment remains at record levels. Murphy sees the state’s high taxes and anti-business environment as the causes.

“The governor is the State’s Chief Executive Officer. Marylanders are suffering from a lack of confidence in our elected officials and from a lack of certainty in our tax structure. As the only candidate who has pledged not to raise taxes, I have aligned myself with Maryland’s families and small businesses. Today, by proposing a tax plan that will grow our economy, I am the only candidate who is inviting families and businesses to consider making Maryland their home,” said Maryland.

“Our 8.25 percent corporate tax is one of many failed policies killing our economy. And when we consider that the vast majority of Maryland businesses are small businesses, and corporate income tax represents only 2 percent of the state’s tax receipts, it makes us wonder why we have the tax at all. As a small business owner, I can tell you firsthand the burdens of operating in Maryland. We need to empower business owners to grow their operations in our state,” said Murphy.

“Maryland has the best labor force and infrastructure in the country. But our tax structures make it impossible for us to compete. My goal is the phased elimination of our corporate income tax in three years. In the first year, we will balance and streamline our budget without raising taxes. This will put our economy in a position to recover and grow. In the second year, we will reduce the corporate income tax rate by 50 percent, funded by organic growth to preserve revenue neutrality. This will give new and existing businesses an incentive to grow their Maryland operations. In the third year, we will eliminate the corporate income tax all together,” said Murphy.

“Finally, after we make Maryland competitive for small businesses and families, we will revisit our personal income tax rates. Personal income taxes make up a greater portion of our state’s tax receipts, so eliminating them completely is not immediately possible. But I am committed to growing Maryland’s economy. Reducing our personal income tax rates, even slightly, will create a significant benefit for Maryland families,” said Murphy.

Brian Murphy and Robert Ehrlich are running in the Republican Primary on September 14. Governor Martin O’Malley is running in the Democratic Party Primary on September 14. The winners of the respective parties’ elections will square off against each other in the November 2 General Election.

Brian Murphy is a successful Maryland businessman with a B.A. in Economics from the University of Maryland and an M.B.A. from the University of Pennsylvania’s Wharton School. He is founder of the Plimhimmon Group, whose first investment, the Smith Island Baking Company, has been featured in The Washington Post, the Wharton Magazine, the Baltimore Sun, Businessweek, and other publications for its principled approach to job creation in Maryland.

For more information on the Brian Murphy for Governor campaign, see www.brianmurphy2010.com. To set up a press or media interview, contact Fran Griffin at fran@brianmurphy2010.com. To volunteer, contact Sam Hale at sam@brianmurphy2010.com or 301-509-1437.