As Republicans in Congress aim to makeover the federal tax code, we will likely continue to hear more about taxes, particularly corporate income taxes.
President Trump and other Republicans often claim that the United States has the highest corporate tax rate in the world. And as reported by NPR last month, that is true for the most part, “though many businesses end up paying far less than the statutory rate.”
The U.S. has the highest top corporate tax rate at least among advanced economies. Compared with nations in the OECD — the Organization for Economic Cooperation and Development, a group of highly developed countries — the U.S. has the highest top corporate tax rate in the world. The top corporate tax rate in the U.S., a combination of federal and state and local taxes, is nearly 39 percent this year. That’s well above most other OECD nations.
If you divide up the amount Kentucky collects in corporate income taxes per capita, it would average out to $170. That’s according to the right-leaning Tax Foundation. The Washington, D.C.-based think tank says the commonwealth has the 18th highest per capita rate of collection, according to 2015 data.
Morgan Scarboro, a policy analyst at the Tax Foundation, says corporations may recover that money in other ways — most obviously, by passing it on to consumers. But it’s hard to tell exactly by how much.
“We know that the corporate income tax — part of it is passed on to other people,” she says. “So that could be to consumers in the terms of higher prices. That could be to wage earners in the form of lower wages.”
In April, Trump revealed a blueprint for changes he’d like to make to the U.S. tax code. His plan would lower the corporate tax rate from 35 percent to 15 percent, reducing tax revenue going into federal coffers by an estimated $2 trillion over 10 years, according to the Tax Foundation.
Capitol reporter Ryland Barton explored how those changes could affect Louisville-based Fortune 500 companies Humana and Yum! Brands:
Louisville-based Humana employs more than 50,000 people and made more than $54 billion in 2015. Under Trump’s plan, the company would have a base tax rate that’s about $11 billion less than it is currently.
For Yum! Brands, with more than 500,000 employees and revenues of more than $13 billion in 2015, the plan would cut a little more than $2.5 billion from its base tax rate.
Corporate income tax is one of the smallest sources of state tax revenue, according to the foundation. Other taxes that corporations pay include property, sales and payroll taxes.
New Hampshire had the highest per capita corporate income tax rate at $433 dollars person, according to the Tax Foundation’s 2015 data. Six states do not levy corporate income tax, including neighboring Ohio.
Here’s a comparison of what residents in other states pay, from the Tax Foundation:
(Click image to enlarge)