Effective Tax Rates Among Industries

U.S.-based oil and gas companies must structure their
operations and invest substantial capital where the
resource is found rather than where the best tax regime is
located. As a result, U.S.-based oil and gas companies’
overseas income is often subject to very high effective
tax rates. In addition, operations in the U.S. generate
separate state and federal income tax obligations or
payments, causing the industry to have an effective tax
rate above the federal statutory rate of 35 percent.

Retailers are placed in a similar situation as they must
naturally align their locations with customers, which
can lead to higher effective tax rates. Other industries,
however, may have greater flexibility on where they
locate their physical capital or other operations to meet
their customer needs. As a result, they may be able to
establish activities in locations with lower effective tax