Economy: American businesses face the highest tax rate in the world, a new report says. We already knew it faced the biggest regulatory burden. Is it any wonder then that the prospect of lightening the load has led to rising stock prices and more jobs?
The Congressional Budget Office, in a study released last Wednesday, noted that U.S. corporations now face a 39.1% tax rate, the highest statutory corporate tax rate in the wealthy G20 group of nations. The U.S. was in third place, but both Japan and Germany — wising up to the fact that higher taxes hurt economic growth — recently cut their corporate rates, leaving the U.S. atop the tax heap.
"The United States made no change in federal corporate tax rates between 2003 and 2012," said the CBO, "and by 2012, it had the highest top statutory rate in the G20."
This may be a big reason why American companies now have an estimated $2.4 trillion parked overseas — they don't want to be hit by absurdly confiscatory tax rates when they bring it home.
President Trump has promised to cut the top corporate rate sharply, to make it competitive with the rest of the developed world, while giving companies a one-time tax break to encourage them to repatriate their foreign profits now locked up overseas. Businesses have taken notice.
Then there's regulation. A 2014 study by the National Association of Manufacturers put the total cost of regulations to the U.S. economy at $2.028 trillion, or roughly 12% of the entire economy. Regulations cost the average firm about $233,182 a year, said NAM, or 21% of average payroll.
Seriously, can anyone be "surprised" that business should suddenly perk up when Trump, upon taking office, pledges to slash regulations by 75%, signs an executive order that requires two old regulations to be cut  for every new one added, and, according to the American Action Forum, eliminates $181 billion in regulatory costs on his first day in office?
As we note above, businesses are showing a little spring their step. And the stock market, as measured by the S&P 500 Index, is up nearly 11% since Trump was elected. Investors clearly expect more than 2% growth.
Trump can do a lot to shrink the regulatory state. But that high corporate tax rate is worrisome. Sen. Majority Leader Mitch McConnell says tax reform must wait until next year. But why wait? Republicans have a great chance to turn the economy into a growth machine. It would be a shame if their political dithering blew it.