Subsequent to a corporate tax reduction in Japan on April 1, 2012, the United States now holds the unenviable position as the country with the highest combined federal-state statutory corporate tax rate among our major trading partners (and indeed the entire OECD). Rate cuts in 1986 brought the United States below the OECD average at the time, but since then we have fallen behind by standing still. While many believe that generous depreciation allowances, deductions, and exclusions make the U.S. burden less severe than statutory rates would suggest, careful analysis of the marginal effective tax rate on capital follows roughly the same pattern as statutory rates, with the U.S. at the top.

There is wide agreement among economists and policymakers that corporate income taxes distort business decision making, discourage capital investment, reduce hiring, and cause firms to invest billions of dollars in tax planning, compliance, and dispute resolution that could otherwise be put to more productive uses. Evidence also indicates that cutting rates has no meaningful negative effects on revenues. Economic simulations by MAPI indicate that reducing the U.S. statutory corporate tax rate from 35 percent to 24 percent would add an extra $500 billion to GDP within five years, create 2 million new jobs, and improve the longer-run fiscal outlook.

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