Wednesday, May 18, 2016

Are Taxes Too High?

The question of taxes being too high is one that comes with a plethora of responses and sometimes a great deal of controversy. A recent article in the Wall Street Journal suggests over half of Americans (57%) feel that income taxes are too high. However, there are mixed reports regarding how US stacks up to other countries around the world.  

US Tax Burden Low
The Organization of Economic Cooperation and Development (OECD) suggests the US is among the lowest taxed countries worldwide. While the individual tax burden in the US has been slowly increasing over the past few years (0.6 percentage points from 25.4% to 26.0% in 2014), when looking at the figures since the year 2000, there has actually been a decrease in the tax burden (from 28.2% to 26.0%).

US Statutory Corporate Income Taxes High
While the US individual tax burden is relatively low when compared to other countries, corporate tax rates are among the highest worldwide. In a report put out in the fall of 2015, the United States ranked third highest when evaluating the corporate income taxes of 173 developed countries around the world. The US’s 39% statutory corporate income tax rate tied with Puerto Rico and was exceeded only by the countries of Chad at 40% and the United Arab Emirates at 55%. By comparison, the average corporate tax rate for all countries included in the survey was only 22.9% or 29.8% when weighted by Gross Domestic Product.

Understanding the numbers
What makes the corporate income tax statistics a bit muddy is the fact that many US businesses do not pay even close to their entire tax bill because loopholes in the US tax codes often provide significant breaks. In fact, the latest statistics from the Government Accountability Office suggests that most companies only pay an average of 12.6% in corporate income taxes. Many of these deductions come from the purchase of foreign subsidiaries or other investments in off-shore organizations.

So, again we ask the age-old question – “Are taxes too high?”  The answer – “It depends on who you ask.”  What we can say for certain is that while the tax burden for US citizens is low, smart business owners should investigate all their options before filing their annual tax bill. For up-to-date news and relevant information on the South Sioux area, please visit our website and follow our blog!
Are Taxes Too High?