In an attempt to further justify his economic agenda (one of which is entirely centered around the wildly misguided idea that our economic woes derive from the fact that corporations are taxed too much) President Trump took to Twitter to comment on China’s tax rate.
China has a business tax rate of 15%. We should do everything possible to match them in order to win with our economy. Jobs and wages!
— Donald J. Trump (@realDonaldTrump) September 14, 2017
It’s a common theme for Trump: China is beating us, they’re eating the stars and stripes for lunch and if we don’t do something about it soon, it’ll be too late. Of course, as with many of the “stats” the president likes to lean on, this one is not accurate.
China’s corporate tax rate is 25%. It’s been 25% since it was lowered from 33% in 2008. There are certain tech companies that may qualify for a 15% rate, but by-in-large the rate is at 25% or higher. As The Financial Times reported, the Unirule Institute of Economics found that when all fees and payments to local and federal governments are added up, the corporate tax rate can actually climb above 45%.
Now, on paper it looks as though our tax rate is still significantly higher than China’s 25%; the official current rate in the U.S. is 38.9%. But this is the statutory rate, and it becomes quite malleable when one factors in tax credits and deductions. The reality is, many U.S. corporations pay far less than a 38.9% tax rate.
As Erik Sherman noted in Forbes, according to a study by the U.S. Government Accountability Office measuring the effective tax rates of corporations, over two-thirds did not pay any taxes, while the average tax rate for profitable large corporations was 16.1%.
Lowering the corporate tax rate in the United States will not help the middle class, it will not quell income inequality—quite the opposite.
It will make the rich richer; it will expand the chasm between the ultra-rich and the rest of us.
Written by Jesse Mechanic
Jesse Mechanic is the editor in chief of The Overgrown.