Say Anything Blog

And Japan is the second worst nation for business taxes in the world.

“This is startling news for America’s businesses and workers,” said Tax Foundation president Scott Hodge, the study’s author. “Tax competition for jobs and investment is fierce, and the U.S. continues to fall further and further behind. Our states should be the world’s leaders in many things, but high taxation should not be one of them. The high federal corporate tax rate is literally crushing states’ competitive abilities. That means fewer jobs for American workers.”

Counting the federal rate alone, the U.S. has the world’s highest corporate tax rate, but including average sub-national rates (federal plus state in the U.S.), Japan edges out the U.S. for the highest-tax location (see table).

This new study breaks the tax down state-by-state, adding each state’s corporate tax rate to the federal corporate tax rate.

The full table of state business tax rates, co-mingled with tax rates from places like Japan and Germany, is at the link.  North Dakota ranks 25th highest, just above Japan.

What’s troubling is that a new economic study by researchers at Harvard and the University of Michigan, and a new report from the CBO, both indicate that workers bear the burden of approximately 70% of corporate taxes.

A new study from three prominent economists finds that employees suffer most when their corporate employers must pay high corporate taxes. That contradicts the theory that has prevailed for decades—that corporate taxes mainly hurt investors—but it supports a recent CBO study by Randolph that found workers bearing 70 percent of the burden of corporate income taxes.

The new study’s authors are Fritz Foley and Mihir Desai of Harvard and James Hines of the Univ. of Michigan, and their study is titled “Labor and Capital Shares of the Corporate Tax Burden: International Evidence.” They first presented it to the Brookings Institution in December, and yesterday, March 17, they presented it to the American Enterprise Institute.

In summary: North Dakota has excessively high business taxes, and workers are paying for it.

Now, remember that the state spends millions each year on job-creating ventures from economic development projects to job fairs in other states aimed at attracting workers to North Dakota.  One wonders if what the state really needs isn’t a friendlier business tax environment.

Thankfully, just such an initiative is making its way to the ballot this election season.  The North Dakota chapter of the Americans for Prosperity are pushing an initiative that would cut business taxes in the state by 15% (and would cut individual taxes by 50%).  This would significantly lighten the load carried by North Dakota workers.  It would help create more jobs, and put more money in each work citizen’s pocket.

Unfortunately, the state’s political interests (Democrats, naturally, and Republicans led by Governor and former Democrat John Hoeven) seem united against this kind of relief.  Which is sad, because tax relief would be a great thing for North Dakota.