Quick Fact: Wall Street Journal editorial ignores effective tax rate to claim U.S. corporate tax rate “is among the highest in the world”

In a February 1 editorial, the Wall Street Journal claimed that the U.S. corporate tax rate is 35%, which “is among the highest in the world,” ignoring the effective corporate tax rate, which is lower in the United States than it is in several other countries.

From the February 1 Wall Street Journal editorial “The President's Priorities”:

Our favorite euphemism is the Administration's estimate that it can get $122.2 billion in new revenue via a “reform” of the “U.S. international tax system.” Reform usually means closing some loopholes in return for lower tax rates. But this is a giant tax increase on American companies that operate overseas, and it includes no offsetting cut in the U.S. 35% corporate tax rate, which is among the highest in the world.

Fact: US effective corporate tax rate significantly lower than its statutory rate

As Media Matters for America has noted, according to an August 2008 report by the Government Accountability Office (GAO), “Statutory tax rates do not provide a complete measure of the burden that a tax system imposes on business income because many other aspects of the system, such as exemptions, deferrals, tax credits, and other forms of incentives, also determine the amount of tax a business ultimately pays on its income.” In the report, the GAO estimated that "[t]he average U.S. effective tax rate on the domestic income of large corporations with positive domestic income in 2004 was an estimated 25.2 percent." Moreover, in June 2007, the Treasury Department concluded: “If the revenue from tax preferences were used to lower the corporate tax rate, the rate could be lowered from 35 percent to 27 percent while producing approximately the same revenue.”

Fact: World Bank study found U.S. effective corporate lower than those of several industrialized nations, including China

In its Paying Taxes 2009 publication, based on its 2009 Doing Business report, the World Bank-International Finance Corporation estimated that the United States has a lower effective rate of current corporate tax than that of several other nations, including Germany, Canada, India, China, Brazil, Japan, and Italy. The publication also included a figure that compared effective and statutory corporate tax rates for several G8 and BRIC [Brazil, Russia, India, China] countries:

World Bank tax graph