39.1%: CBO Says U.S. Has Highest Top Statutory Corporate Tax Rate in G20

By Terence P. Jeffrey | March 9, 2017 | 9:36 AM EST

(AP Photo/Susan Walsh)

(CNSNews.com) - The United States has the highest top statutory corporate tax rate—39.1%--of any nation in the G20, according to a study released Wednesday by the Congressional Budget Office.

That rate is nearly twice as high as the 20-percent rate in Russia, which, along with Saudi Arabia and Turkey, has the lowest statutory corporate tax rate in the G20.

The U.S. won the top spot on the statutory-corporate-tax-rate list after Japan and Germany, which formerly ranked first and second, cut their rates.

“The United States made no change in federal corporate tax rates between 2003 and 2012,” said the CBO, “and by 2012, it had the highest top statutory rate in the G20.”

(The full version of this chart, including the rankings for the "effective corporate tax rate," is on page 2 of the CBO report.)

“In 2003, Japan, Germany, and the United States had the highest statutory corporate tax rates among G20 countries,” said the report, “by 2012, reductions in Japan’s and Germany’s top rates had dropped them to second and ninth place, respectively, boosting the United States to the top of the list.”

“At the time that the tax rates considered in this analysis were computed,” said the CBO report, “2012 was the most recent year for which complete data were available.”

However, since 2012, the report noted, the trend among G20 nations that changed their corporate tax systems was to cut corporate taxation.

“Four G20 countries modified their corporate income tax systems after 2012, generally resulting in lower effective tax rates,” said the report. “Japan, South Africa, and the United Kingdom reduced their top statutory corporate tax rates.”

The CBO report looked at three different measures of corporate taxation in the G20 countries. These included the top statutory corporate tax rate, the average corporate tax rate, and the effective corporate tax rate.

The top statutory corporate tax rate in the United States includes the top federal tax rate on corporations combined with the taxes that states impose on corporations.

“The average corporate tax rate is a measure of the total amount of corporate taxes that a company pays as a share of its income,” said the report.

“The effective marginal corporate tax rate (in this document the effective corporate tax rate), is a measure of a corporation’s tax burden on returns from a marginal investment (one that is expected to earn just enough, after taxes, to attract investors),” said the report.

In the G20, the 39.1 percent top statutory corporate tax rate in the United States ranked first. Japan’s 37.0 percent rate ranked second. Argentina’s 35.0 percent rate ranked third. South Africa’s 34.6 percent rate ranked fourth. France’s 34.4 percent rate ranked fifth.

Russia, Saudi Arabia and Turkey—all of which had top statutory corporate tax rates of 20 percent—shared the bottom position in the G20 ranking.

The United States also ranked near the top of the G20 in the “average corporate tax rate” and the “effective corporate tax rate.”

In the ranking of average corporate tax rates, the U.S. rate of 29.0 percent was third behind Argentina (37.3 percent) and Indonesia (29.0 percent).

In the ranking of effective corporate tax rates, the U.S. rate of 18.6 percent was fourth behind Argentina (22.6 percent), Japan (21.7 percent) and the United Kingdom (18.7 percent).

The U.S. top statutory corporate tax rate of 39.1 percent results from the high federal corporate tax rate combined with the fact that most states tax corporations also.

“In the United States, the top federal statutory corporate tax rate (the rate set by law that applies to the highest corporate income tax bracket) has been 35 percent since 1993,” said the report. “Most corporate income is taxed at that rate. With state taxes added in, the stop statutory rate is even higher; on average, that combined rate was 39.1 percent in 2012, among the highest in the world.”

“In 2012,” said the report, “44 states and the District of Columbia levied taxes on corporate income, and, on average, the top combined rate for federal and state taxes paid by corporations (accounting for the deduction of state taxes) was 39.1 percent.”

Although the U.S. federal corporate tax rate is progressive, the CBO concluded that most federal corporate income tax ends up being paid at the highest rate.

“[A]ny coporation with taxable income above $18.3 million faces a rate of 35 percent on its total taxable income,” said the report. “Most corporate income is taxed at that 35 percent rate; more than 90 percent of U.S. corporate taxable income is generated by companies with income above $18.3 million.”

The G20 says its member states account for "three-quarters of global trade."

“The Group of Twenty (G20) is the central forum for international cooperation on financial and economic issues,” says the group’s website. “The G20 countries account for more than four-fifths of gross world product and three-quarters of global trade, and are home to almost two-thirds of the world’s population. Its decisions are influential and help to bring about reform at national and multinational levels.

“The G20 comprises 19 countries plus the EU,” it says. “These countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom (UK) and the United States of America (US).”

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