Trump, taxes and regulations
During this month’s Republican presidential primary debate in New Hampshire, businessman Donald Trump took high taxes to task for stunting job growth in the U.S., claiming that “we’re the highest taxed country in the world.”
Several critics and pundits were quick to find fault with The Donald’s comment, pointing out that many other countries have a higher tax rate than the U.S. If you look at tax revenue as a percentage of GDP, the U.S. actually ranks 27 among 34 developed countries, according to the Organization for Economic Cooperation and Development (OECD). (Denmark tops the list, followed by France, Belgium, Finland and Italy.)
It’s not the first time Trump has made a wild claim, but in this case he’s right, by one very important measure—the corporate statutory tax rate. Since 1990, this rate has hovered around 39%, making it the highest among OECD nations, and for the largest GDP in the world.
Even when compared to 162 other countries, the U.S. still has the third highest corporate tax rate, following the United Arab Emirates (55%) and Chad (40%), where collecting taxes formally is very difficult.
To his larger point, Trump is right again. High taxes—both in the U.S. and abroad—stand in the way of global growth and create economic friction. But these taxes aren’t the only hurdle, and lowering them would be just the first step in a series of steps to lighten the burden placed on businesses.
The other hurdle is what the Competitive Enterprise Institute (CEI) calls the “hidden” tax—regulation. Complaining about income taxes is an American pastime in its own right, but regulatory costs run much higher, eating up 11% of the country’s $17.4 billion GDP.