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Response to SuisseBleu (Reply #3)

Mon Apr 2, 2012, 06:10 PM

4. Effective coporate income tax rates in U.S. are lower than for OECD countries - CBO.


Summary Table 1.
Taxes on Corporate Income in OECD
Countries in 2002 as a Percentage of
Gross Domestic Product
shows that U.S. effective corporate taxes as a percentage of GDP is 1.8% while the weighted average of OECD countries is 2.5%.

page 12

Although the United States’ statutory corporate tax rates are among the highest of those in OECD countries, they are comparable with the statutory rates imposed by other members of the Group of Seven (G7).6

page 13

How effective marginal corporate tax rates in the United States compare with other countries’ rates depends on the type of corporate investment being made and the way in which it is financed. Corporate investments are financed by either shareholders or lenders (which include corporate bondholders). Compared with the average effective marginal corporate tax rates for shareholder-financed investment in machinery among all other OECD countries, the United States’ rate is slightly higher; compared with the average among other G7 countries, the United States’ rate is about the same. Compared with the average rate for shareholder-financed investment in industrial structures among all other OECD countries, the United States’ rate is significantly higher; however, the United States’ rate is close to the average among other G7 countries. In contrast to rates for shareholder-financed investment, the United tates’ effective marginal corporate tax rate for lender-financed investment in machinery is low by comparison with the average for other OECD countries and for other G7 countries. From an international perspective, although the United States’ effective marginal corporate rates for shareholder-financed investments are higher than the average, such rates for investments financed by a combination of shareholders and lenders may be lower than the average if a sufficient fraction of the marginal investment is financed by lenders.

Debt to Equity ratio of corporations is nearly always above 1 : 1 so Debt financing is weighted more heavily than equity {generally (1.5 : 1) up to (2 : 1)}.

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