Taxes: If you only read the Wall Street Journal, you might think they are the biggest problem in America right now.
The WSJ, for example, has run two news stories in the past two days about companies straining against the bonds of outrageously high U.S. corporate tax rates.
On Tuesday, the WSJ wrote that U.S. manufacturers want lower tax rates, citing a study by the University of Calgary's School of Public Policy that declares U.S. manufacturers have a "typical marginal effective tax rate" of 35.6 percent, the highest in the Organization for Economic Co-operation and Development.
On Wednesday, the WSJ had a story about a handful of companies that have just had enough of all this egregious taxation and are abandoning America for countries that will tax them less. This story asserted that the U.S. has an overall corporate tax rate of 35 percent, the highest among developed nations, this time without bothering to give a source. It takes the additional step of noting that Ireland's tax rate is 12.5 percent -- even stupid little Ireland has a lower tax rate than the U.S., gah, the story says (I am paraphrasing).
First, about that "typical marginal effective tax rate" in the Tuesday story about manufacturers -- it's not a real tax rate. It's designed to measure the attractiveness of investing in a country. Unfortunately, the WSJ doesn't link to the study it cites, and the University of Calgary's School of Public Policy could not identify the source for the 35.6 percent number. The school did publish a paper in 2011, which calculated a 2010 marginal effective tax rate for U.S. manufacturers of 32.7 percent. That rate may have changed a bit because of inflation, but probably not by much.
In any event, this "marginal effective tax rate" number shouldn't be compared to actual tax rates, because it's really designed to be a measure of incentives for business investment, taking tax rates mandated by law and adjusting them for stuff like depreciation allowances.
Update: Extraordinarily boring mystery solved: The School of Public Policy has done more investigation and discovered the 35.6 percent number comes from a presentation it recently made on Capitol Hill. There's no link. What's more, that number is the METR for all industries, not just for manufacturing, which is 33.9 percent. The school says it made a mistake and gave the WSJ the wrong number. Anyway, as I said, these METR numbers are apples, other tax rates are oranges.
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