GOP Rep. Jim Sensenbrenner says U.S. has "highest corporate tax rate in the world"

With unemployment remaining stubbornly high, U.S. Rep. Jim Sensenbrenner, R-Wis., was asked what the federal government could do to create jobs.

The suburban Milwaukee congressman, who was first elected to the House in 1979, didn’t hesitate in replying.

"We’ve got to address the fact that we have the highest corporate tax rate in the world," Sensenbrenner told the editorial board of the Milwaukee Journal Sentinel on Sept. 29, 2011. "It’s 35 percent."

Sensenbrenner argued that if corporate taxes in the U.S. were lower than they are in other parts of the world, more U.S.-based multinational companies would "repatriate" their profits back to America, creating more jobs here.

It’s Sensenbrenner’s opinion that lowering the U.S. corporate tax rate would create jobs. We can’t check an opinion.

But we can check whether the rate is 35 percent and if it is the highest in the world.

Sensenbrenner’s district director, Loni Hagerup, pointed to a 2011 report from the Organization for Economic Corporation and Development, a Paris-based group of 34 large, industrialized democracies.

The widely quoted report says the U.S. corporate tax rate is 35 percent, tops among the member countries.

Next in line were France and Belgium (both 34 percent), and then Australia, Japan, Spain and Mexico (each 30 percent).  

Seems pretty straightforward. Sensenbrenner is right, right?

Let’s first look at two points:

1. "Combined" corporate tax rate

Some analysts, when comparing countries, use the Paris group’s report but cite a different figure -- the combined corporate tax rate, rather than merely the corporate tax rate. The combined rate includes not only federal but also state tax rates for corporations. The combined corporate tax rate in the U.S. is 39.2 percent, which ranks second behind Japan’s 39.5 percent.

But Sensenbrenner was asked what the federal government could do to create jobs, so the corporate tax rate -- not the combined rate -- is relevant here.

2. Limitations of the corporate rate

We consulted experts at two Washington, D.C. research organizations -- Tax Foundation president Scott Hodge and Roberton Williams, senior fellow at the Tax Policy Center. Both said Sensenbrenner is correct in stating that the U.S. corporate tax rate is 35 percent and that the rate is the highest in the world, but they added some context to the discussion.

Williams said the corporate tax rate "is not a good measure of the taxes that corporations actually pay." While some corporations might pay the full 35 percent rate, many pay considerably less, depending on the types of investments they make, depreciation they take and other factors that reduce taxable income, he said.

Hodge agreed. He added, however, that the "effective" federal tax rate (after deductions) that corporations pay is about 26 percent -- and that also is among the highest rates of all industrialized nations.

Our conclusion

Asked what the federal government could do to create jobs, Sensenbrenner said lower the "corporate tax rate," which he said was 35 percent and the highest in the world. A widely quoted annual report says the U.S. corporate tax rate is 35 percent and is highest among 34 large, industrialized countries. Two experts agreed with the rate and the ranking.

We rate Sensenbrenner’s claim True.

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Eric Hovde

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