Corporate Tax Cuts are good for US Economy?

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The Tax Cuts and Jobs Act permanently lowered the federal corporate income tax rates, which decreased from 35 percent to 21 percent. According to the Tax Foundation research and an article by Erica York, on which they analyze the effects of such changes, they conclude that it is beneficial to the US economy. These are the more relevant items of the analysis:

  • Prior to the Tax Cuts and Jobs Act, the United States’ high statutory corporate tax rate stood out among rates worldwide. Among countries in the Organization for Economic Co-operation and Development (OECD), the U.S. combined corporate income tax rate was the highest. Now, post-tax reform, the rate is close to average.
  • A corporate income tax rate closer to that of other nations will discourage profit shifting to lower-tax jurisdictions.
  • New investment will increase the size of the capital stock, and productivity, output, wages, and employment will grow. The Tax Foundation Taxes and Growth model estimates that the total effect of the new tax law will be a 1.7 percent larger economy, leading to 1.5 percent higher wages, a 4.8 percent larger capital stock, and 339,000 additional full-time equivalent jobs in the long run.
  • Economic evidence suggests that corporate income taxes are the most harmful type of tax and that workers bear a portion of the burden. Reducing the corporate income tax will benefit workers as new investments boost productivity and lead to wage growth.
  • If lawmakers raised the corporate income tax rate from 21 percent to 25 percent, we estimate the tax increase would shrink the long-run size of the economy by 0.87 percent, or $228 billion. This would reduce the capital stock by 2.11 percent, wages by 0.74 percent, and lead to 175,700 fewer full time equivalent jobs.

For further details on this visit: https://taxfoundation.org/benefits-cutting-corporate-income-tax-rate?utm_source=Tax+Foundation+Newsletters&utm_campaign=5122ab039d-EMAIL_CAMPAIGN_2018_08_13_02_01&utm_medium=email&utm_term=0_8387957ec9-5122ab039d-429272993&mc_cid=5122ab039d&mc_eid=1267030dc2

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Published by Carlos Nazario