Global Competitors Outpacing United States Because of Lower Corporate Tax Rate, New Study Reveals

U.S. Economy Lags, Less Competitive and Attractive to Business

WASHINGTON--()--The RATE Coalition today released “Macroeconomic Effects of Recent Lower Corporate Income Tax Rates Enacted Abroad,” a study by Ernst and Young tax professionals, which measured the effect of changes in corporate income tax systems, including lower corporate income tax rates, by our global competitors on the U.S. economy.

The study found that over the long-term, the U.S. economy will be between 1.5 and 2.6 percent smaller because other nations’ corporate tax rates are considerably more competitive. America’s increasing inability to compete will result in real wages being 1.0 – 1.2 percent less than they otherwise would have been. In today’s $15.7 trillion economy, the long-term impact on the U.S. economy is equal to a reduction in U.S. GDP of about $235 billion to $345 billion each year, according to the report. RATE Coalition co-chairs James Pinkerton and Elaine Kamarck released the following statements on the study:

“In 1986 President Reagan and Congressional leaders passed a tax reform package that drastically reduced America’s corporate tax rate and broadened the tax base, clearing the way for over a decade of strong economic growth,” said James P. Pinkerton, Co-Chair of the RATE Coalition and former White House domestic policy adviser to Presidents Ronald Reagan and George H.W. Bush. “The new data in today’s report makes clear that the United States needs to replicate that success or risk being outcompeted by our foreign rivals. Our corporate tax rate has remained at a standstill while our competitors have lowered theirs by 35 percent. We can’t afford to wait any longer.”

“America has long been the world leader in terms of innovation and work ethic, but we can no longer rely on those virtues alone as other countries outpace us when it comes to corporate competitiveness,” said Elaine Kamarck, Co-Chair of the RATE Coalition and former White House adviser to President Bill Clinton and Vice President Al Gore. “In only a few years, our competitors’ average corporate tax rate will be 24 percent lower than ours and the United States economy will be up to 2.2 percent smaller than it would be if America had a competitive corporate tax rate. We need to reform our tax code by putting all tax expenditures on the table and committing ourselves to achieving a competitive corporate tax rate. That’s what worked in 1986 and that is what will work today.”

Study Highlights:

  • The average statutory foreign corporate tax rate of the 19 countries analyzed will have fallen nearly 35 percent between 1988 and 2015, when all currently scheduled changes will be fully in effect.
  • U.S. GDP is estimated to be between 1.2 percent and 2.0 percent smaller in 2013 because of the high U.S. corporate tax rate relative to the reductions in corporate tax rates enacted abroad beginning in 1988.
  • In the long run, the U.S. economy, as measured by GDP, is estimated to be smaller by between 1.5 percent and 2.6 percent if the current differences in corporate tax rates remain.
  • In today’s $15.7 trillion economy, the long run impact on the U.S. economy is equivalent to a reduction in U.S. GDP of about $235 billion to $345 billion each year.
  • In 2013 real wages will be about 0.1 percent to 0.3 percent lower than they would have been otherwise.
  • In the long-run, real wages would be about 1.0 percent to 1.2 percent lower than they would have been otherwise.

The full study can be found here.

About RATE Coalition:

RATE is a coalition of 30 companies and organizations advocating for sensible corporate tax reform. Making the tax code fairer and simpler will help spur job growth and stimulate the U.S. economy, and make us more competitive globally. RATE members currently include: AT&T, Altria Client Services Inc., Association of American Railroads, Boeing, Brown Forman, Capital One, Cox Enterprises, CVS Caremark, FedEx, Ford, GAP Inc., General Dynamics, Home Depot, Intel, Kimberly-Clark, Liberty Media, Lockheed Martin, Macy's, National Retail Federation, Nike, Northrup Grumman, Raytheon, Reynolds American, Southern Company Time Warner Cable, T-Mobile, UPS, Verizon, Viacom and Walt Disney. RATE members and affiliated companies represent over 30 million employees in all 50 states and support innumerable numbers of suppliers and small businesses. More information about the coalition is available at www.RATEcoalition.com.

Contacts

RATE Coalition
Colin Dunn, 202-400-2609
media@ratecoalition.com

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Contacts

RATE Coalition
Colin Dunn, 202-400-2609
media@ratecoalition.com