November 5, 2018

What Do High Tax Rates Mean For International Competitiveness?

The nonprofit, nonpartisan Tax Foundation released its annual International Tax Competitiveness Index late last month and, after enacting a comprehensive tax reform package earlier this year, the United States’ ranking improved from 28thamong Organization for Economic Cooperation and Development (OECD) countries to 24th. Canada ranked 18thamong the OECD countries.

The Tax Foundation defines a competitive tax code as “one that keeps marginal tax rates low” because, “in today’s globalized world, capital is highly mobile” and “businesses can choose to invest in any number of countries throughout the world to find the highest rate of return.” The Tax Foundation notes that, according to research from the OECD, corporate taxes are most harmful for economic growth; personal income taxes and consumption taxes are less harmful; and taxes on immovable property are the least harmful.

For the fifth year in a row, France had the least competitive tax system. The country has a high corporate income tax rate (34.4 percent), high property taxes, an annual net wealth tax, a financial transaction tax, an estate tax, and high, progressive, individual income taxes for dividend and capital gains income.