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Communists More Pro-Business Than The US?
China Gains, Business Taxes Less Than The US
By Michael P. Tremoglie, The Bulletin
Is the world’s largest communist government more pro-business than the world’s largest capitalist economy? This seemingly oxymoronic statement might actually be true.
Communist China, the world’s third largest economy and the largest non-democratic one, has a more favorable business tax policy than the United States. It does not have a capital gains tax on the sale of stocks and its corporate taxes are less.
Foreign investors in Chinese currency securities are also exempt from paying a capital gains tax. China has been trying to attract more foreign capital into its domestic stock market. The country also provides “tax holidays” for companies seeking to do business in China. For example, if Ford wanted to build a plant in China, the company would be exempted for taxes for a certain period of time.
“China is no longer a strictly communist country,” Chris Edwards, director of tax policy for the Washington, D.C.-based Cato Institute. “It is still a dictatorship, but it is a mixed [one] moving more towards capitalism. With the increases Obama is proposing, we seem to be moving in the other direction.”
Countries that have a more favorable tax system than the U.S. are not unusual, according to Mr. Edwards. Many countries have a more favorable capital gains tax rate and more favorable corporate tax rates in general than the United States.
Combined business tax rates in the U.S. are not in line with the Organization for Economic Co-operation and Development (OECD) countries, a group of industrialized free market democracies. But it seems American business taxes are also not competitive with non-democratic powerhouse economies.
Two years ago, Congress proposed cutting the federal corporate tax rate from 35 percent to 30.5 percent, a reduction many believe would not make the U.S. competitive.
According to the Tax Foundation, Washington, D.C., a nonpartisan organization that educates citizens about tax policies, the average combined federal and state corporate tax rate in the U.S. is 39.3 percent, second among OECD countries to Japan’s combined rate of 39.5 percent By comparison, China’s corporate tax rate is only 25 percent.
The combined rate for businesses operating in Pennsylvania is even higher. The combined federal and state corporate tax rate in this state is 41.5 percent (the figure is adjusted for credit paid for federal taxes). It is second only to Iowa, which has a 12 percent corporate tax rate. It is followed by Pennsylvania’s 9.99 percent rate and Minnesota’s 9.8 percent rate.
Moreover, other countries besides China have eliminated capital gains taxes. Germany, Malaysia, the Netherlands and New Zealand are countries where there is no capital gains tax.
“Other countries seem to recognize something that we do not in this country,” said Mr. Edwards. “That is that taxing capital gains is double taxation of the same income.”
Michael P. Tremoglie can be reached at mtremoglie@thebulletin.us
Communist China, the world’s third largest economy and the largest non-democratic one, has a more favorable business tax policy than the United States. It does not have a capital gains tax on the sale of stocks and its corporate taxes are less.
Foreign investors in Chinese currency securities are also exempt from paying a capital gains tax. China has been trying to attract more foreign capital into its domestic stock market. The country also provides “tax holidays” for companies seeking to do business in China. For example, if Ford wanted to build a plant in China, the company would be exempted for taxes for a certain period of time.
“China is no longer a strictly communist country,” Chris Edwards, director of tax policy for the Washington, D.C.-based Cato Institute. “It is still a dictatorship, but it is a mixed [one] moving more towards capitalism. With the increases Obama is proposing, we seem to be moving in the other direction.”
Countries that have a more favorable tax system than the U.S. are not unusual, according to Mr. Edwards. Many countries have a more favorable capital gains tax rate and more favorable corporate tax rates in general than the United States.
Combined business tax rates in the U.S. are not in line with the Organization for Economic Co-operation and Development (OECD) countries, a group of industrialized free market democracies. But it seems American business taxes are also not competitive with non-democratic powerhouse economies.
Two years ago, Congress proposed cutting the federal corporate tax rate from 35 percent to 30.5 percent, a reduction many believe would not make the U.S. competitive.
According to the Tax Foundation, Washington, D.C., a nonpartisan organization that educates citizens about tax policies, the average combined federal and state corporate tax rate in the U.S. is 39.3 percent, second among OECD countries to Japan’s combined rate of 39.5 percent By comparison, China’s corporate tax rate is only 25 percent.
The combined rate for businesses operating in Pennsylvania is even higher. The combined federal and state corporate tax rate in this state is 41.5 percent (the figure is adjusted for credit paid for federal taxes). It is second only to Iowa, which has a 12 percent corporate tax rate. It is followed by Pennsylvania’s 9.99 percent rate and Minnesota’s 9.8 percent rate.
Moreover, other countries besides China have eliminated capital gains taxes. Germany, Malaysia, the Netherlands and New Zealand are countries where there is no capital gains tax.
“Other countries seem to recognize something that we do not in this country,” said Mr. Edwards. “That is that taxing capital gains is double taxation of the same income.”
Michael P. Tremoglie can be reached at mtremoglie@thebulletin.us
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