A STIMULUS: Rangel Plans Push to Cut Top Corporate Tax Rate to 28 Percent. “New York Representative Charles Rangel said he’s revising his tax overhaul proposal to reduce U.S. corporate tax rates to 28 percent, down from the current rate of 35 percent. . . . Only Japan has a higher marginal corporate tax rate among developed nations, the Treasury Department said last year. When state taxes are factored in, U.S. corporations pay about 39 percent on their last dollar of profit.”
Rangel also has proposed making executives at private- equity firms and other partnerships pay ordinary income-tax rates instead of capital-gains rates on the incentive fees they charge their investors, known as ``carried interest.’’ The top ordinary income-tax rate is currently 35 percent; Obama has proposed increasing that to 39.6 percent, and Rangel has proposed imposing an additional surcharge as high as 4 percent for those who make over $200,000.
Rangel didn’t say what other benefits he’d eliminate to reduce the corporate rate further.
Obama has said that the effective tax rate paid by U.S. companies is much lower once they claim deductions, credits, and other adjustments to taxable income. In 2006, for example, American companies paid an average effective tax rate of about 23.7 percent, according to a study by Ernst & Young LLP.
Presumably the carried interest tax increase would also affect hedge fund managers too.