Tax Policy Update - May 19 2015

NUMBER OF THE WEEK: 40 percent. The average combined federal and state tax rate paid by most U.S.-based firms, according to a Wall Street Journal op-ed by James Freeman today, entitled "The Tax Takeover Craze." Freeman claims this is "roughly double the average in Europe and Asia," and is the driving force behind the continuing trend of companies moving their headquarters overseas. Grain of salt: the conservative-leaning Tax Foundation has warned against using the "average effective tax rate" as a reliable measure,noting that it "is irregular from year to year due to the complexity and instability of the corporate tax code." A better measure, according to the Tax Foundation, is the marginal effective tax rate (METR) which averages around 35 percent—still higher than in any other developed country.