Trump says China's business tax rate is 15% — it's actually much higher

pulse

September 14, 2017 2:47 PM

President Donald Trump compared the US corporate tax rate with China's in a tweet justifying tax cuts. The only problem is he got China's rate wrong.

As part of a cascade of tweets Wednesday night, President Donald Trump said one of the major incentives for a tax overhaul, including cuts, was making the US more competitive with the rest of the world.

As an example, the president pointed to China's headline corporate tax rate.

"China has a business tax rate of 15%," he tweeted. "We should do everything possible to match them in order to win with our economy. Jobs and wages!"

But Trump's tweet misstated the headline corporate tax rate in China.

According to the accounting firm PwC, the actual corporate tax rate in China is 25%. That remains below the US federal government's 35% rate, but it's higher than what Trump suggested in his tweet.

PwC noted that the rate for "industries encouraged by the China government," such as high-tech industries, was 15%.

In the US, businesses are subject to the 35% rate but can claim a slew of deductions that drive their tax bills lower. For instance, S&P 500 companies on average already pay an effective tax rate somewhere in the mid-20s.

Trump's push for a 15% rate as part of a massive tax overhaul appears to be an increasingly futile effort. Republican leaders including House Speaker Paul Ryan and Treasury Secretary Steven Mnuchin have acknowledged that budgetary constraints will most likely cause the corporate rate to end up in the low to mid-20s as part of the proposed tax overhaul.

That would place the US right around China's rate.

pulse