Before 2018 the highest corporate income tax rate in the U.S. was 35%. Since 2019 the corporate tax rate has been a flat rate of 21%. President Biden has proposed to increase the corporate tax rate to 28%. When the highest corporate tax rate was 35%, that was the highest corporate income tax rate in the world. What do you feel is an appropriate income tax for corporations to pay? Why? Consider corporate income tax rates in other parts of the world in answering this question.
What to do
1) Write an initial post of less than 300 words, with a title and good citations
2) Respond to two classmates posts and include citations plus titles for each response
POST TO RESPOND
1. How will the increased corporate tax rate affect foreign activity?
The current corporate tax rate and OECD are 21% and 25.8%, respectively. The OECD stands for Organization for Economic Co-operation and Development. It is used to compare integrated, combined, marginal effective, and average effective corporate tax rates between different companies. The United States is currently slightly below the average OECD of 26%. Biden’s new proposal will make the United States OECD third from highest in the world. It will decrease business in the United States and increase foreign activity.
How do you think the increased corporate tax rate will affect foreign activity?
2. What tax rate would be most appropriate for corporations and why?
An appropriate and fair tax system may be viewed differently from various points of view. The corporate tax rate is currently 21% and has benefited large corporations as they have largely decreased the tax rate they used to pay (35%). This has impacted smaller corporations as they may not all have had to pay 21%. Due to the flat tax for all, all are obligated to this rate.
The 28% tax rate for corporations that is being proposed by the Biden administration may not hurt large corporations, but it could hurt smaller businesses. I believe that returning to a progressive rate would be the best option. We are still in the middle of a pandemic, and it may not necessarily be the best time to impose an increase. Another option would be to lower corporates taxes. If the rates are raised high it could cause businesses to move out of the country.
Returning to a progressive rate would allow smaller businesses to be taxed at a lower rate than larger corporations that can and should pay more. Some countries have a 0% corporate tax, but also their populations are small. The United Arab Emirates has the highest at 55%.
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