Study on International Business Competitiveness Underscores Need for U.S. Corporate Tax Reform
KMPG Guide to International Business Location Ranks U.S. 8th Out of 10 Countries
Washington, DC, April 14, 2010 - The release of a KMPG study on international business location ranking the United States near the bottom of the pack highlights the need to lower the federal corporate tax rate, according to a Tax Foundation report.
KMPG's "2010 Competitive Alternatives" study, the firm's guide to international business location, ranks the U.S. eighth out of 10 countries, ahead of only Germany and Japan. U.S. border nations Mexico and Canada rank first and second, respectively, with the lowest overall costs of doing business.
"U.S. lawmakers who are worried about the economy's slow recovery and weak job growth should take special note of America's low ranking among countries that are cost-effective places to do business," said Tax Foundation President Scott Hodge, who authored Tax Foundation Fiscal Fact, No. 221, "New KMPG International Location Study: U.S. Is Falling Behind; Taxes Are a Major Fault." The Fiscal Fact is available online here.
"Cutting the federal corporate tax rate would immediately improve U.S. competitiveness while setting the stage for long-term economic growth," Hodge said.
The KPMG study compares the business-cost competitiveness of 112 cities in 10 countries, including 15 in Canada and 60 in the U.S. Considering every factor, the most cost-effective city was Monterrey, Mexico, while Montreal was the top-rated Canadian city and Tampa the top-ranked American city.
On the tax side, KPMG considers corporate income taxes, capital taxes, sales taxes, property taxes and local business taxes. KMPG compares both statutory corporate tax rates as well as effective corporate tax rates after accounting for various credits and deductions that each country in its corporate tax code.
On top of the 34% average federal rate faced by U.S. firms, state and local corporate income taxes are factored in as well. Of the sample U.S. cities selected by KMPG, effective corporate income tax rates ranged from 26.49% in Seattle to 37.8% in Honolulu. By contrast, St. John's, Canada, has an effective corporate come tax rate of 9.62%.
"Many of the cost components measured by KPMG are beyond the control of lawmakers or can't be quickly improved with policy solutions," Hodge said. "Tax policy, however, is one factor that federal and state lawmakers can change immediately, resulting in dramatic short- and long-term benefits. Lowering corporate tax rates would go a long way in improving U.S. competitiveness abroad."
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