Last updated on: 2/16/2017 10:17:15 AM PST
Does Lowering the Federal Corporate Income Tax Rate Create Jobs?
Alexander Franco, PhD, Assistant Professor at Stamford International University in Bangkok, Thailand, wrote in his Jan. 3, 2017 article "It's Time to Cut the US Corporate Tax Rate," available from the Foundation for Economic Education (FEE) website, wrote:
"The lowering of the corporate tax rate will provide much needed debt-free capitalization, new jobs (particularly in the high tech industry), and new tax revenue...
A lower corporate tax rate increases American competitiveness while providing an increased flow of domestic, debt-free capital that will boost investments and production. In reality, a corporate income tax often serves as a second retail tax for consumers. The lowering of such a tax can reduce prices within a competitive environment, thus controlling inflation and increasing consumer purchasing power. A further benefit of lowering the tax is to allow for higher wages and benefits – two areas that often bear the burden for paying corporate income taxes."
Jan. 3, 2017 - Alexander Franco, PhD
Ross DeVol, MA, Chief Research Officer at the Milken Institute, wrote in his Apr. 1, 2015 article "Just Do It: Cut Corporate Taxes and Create Middle-Class Jobs," for the Huffington Post, wrote:
"[W]e need economic policies that incentivize firms and entrepreneurs to take risks by expanding and hiring. We can start by reducing and modernizing the corporate tax rate system...
To gauge the impact of a lower corporate income tax rate, Milken Institute economists evaluated the likely effect of a cut in the top U.S. corporate tax rate from 35 to 22 percent, with the reduction phased in over a five-year period beginning next year. This new rate, which would match the current OECD average, would provide a substantial boost to economic growth...
Lower corporate tax rates will lead to higher levels of domestic investment and a greater accumulation of productive capital. Having more capital stock available per worker augments productivity and improves long-run economic growth, leading to more jobs and a higher standard of living for those workers. Industries exporting a greater share of the goods and services that they produce pay higher wages than those that don’t. As exports rise from an improved competitive position, good middle-class jobs are created."
Apr. 1, 2015 - Ross DeVol, MA
Jason Fichtner, PhD, Senior Scholar at the Mercatus Center of George Mason University, said in his study "Fundamental Tax Reform: Fixing the Corporate Tax Code," available at mercatus.org (accessed June 21, 2013):
"To expand their economies and increase employment, most developed countries are restructuring their corporate tax systems and reducing their corporate tax rates. To date, the United States has taken an opposite approach that has yielded one of the most complex and un-competitive corporate tax structures in the industrialized world. Its effects are troublesome: outsourced economic activity; lost domestic investment, growth, and jobs; and an eroded corporate tax base...
Estimates of US jobs lost due to the current corporate income tax range from 200,000 to 3 million, but the consensus is that many companies terminate employees because the current corporate tax structure cuts so extensively into their profits that the companies move abroad. During the 2000s, major multinational corporations reduced U.S. jobs by 2.9 million while increasing overseas employment by 2.4 million."
June 21, 2013 - Jason Fichtner, PhD
Orrin Hatch, JD, US Senator (R-UT), said in his Mar. 30, 2012 statement "Hatch on US Corporate Tax Rate Becoming Highest in World," available on the US Senate Committee on Finance website:
"Every industrialized country around the globe understands that tax rates can determine whether or not businesses succeed or fail. And America’s job creators know that to remain competitive abroad and create jobs here at home, we’ll have to radically reform our nation’s tax code, transition to a territorial tax system, and reduce our corporate tax rate..."
Mar. 30, 2012 - Orrin Hatch, JD
Business Roundtable, a group of major-firm CEOs, said in its Apr. 15, 2013 report “Corporate Tax Reform – The Time Is Now” at usahomecourt.org:
"Corporate tax reform to modernize our tax system will enhance US economic growth, increase US investment, and provide for better and higher paying jobs. A competitive corporate tax rate and a more modern and competitive international tax system will provide a level playing field for American-based businesses, increasing the growth of US companies, attracting investment to the United States, and enhancing and sustaining US economic growth and job creation."
Apr. 15, 2013 - Business Roundtable
The National Foreign Trade Council said in its Oct. 26, 2011 statement “NFTC Calls Camp’s Proposal a ‘Thoughtful Start’ and Step Forward on Tax Reform” on nftc.org:
"The U.S. tax system has been the outlier in the world economy for far too long. Moving to a territorial tax system and reducing the corporate tax rate will allow companies to grow in the United States, and will also attract more in-bound investment, leading to more jobs."
Oct. 26, 2011 - National Foreign Trade Council
The Reforming America’s Taxes Equitably (RATE) Coalition, a group of 30 companies advocating for lower corporate tax rates, said in its May 2012 paper “Corporate Tax Reform and Innovation: Pro-Growth Policy in a Time of Economic Need and Fiscal Constraint” by Robert Rizzi and Jonathan Sallet on ratecoalition.com:
"[Corporate tax] reform, especially in a time of constrained fiscal resources, should be properly viewed as an element of U.S. innovation policy. Innovation policy is, of course, fundamental to the economic growth of a large developed economy like the United States. It supplies the ‘extra ingredient’ necessary to complement capital and labor, which is why numerous respected studies have labeled it fundamental to increased productivity and, therefore, to the ability of a nation to host start-up businesses and create new jobs… Lowering the corporate tax rate will allow such companies to put more capital to work, leading to additional capital investment and greater productivity. This, in turn, will serve as a direct catalyst for job creation and growth."
May 2012 - Reforming America's Taxes Equitably (RATE) Coalition
The National Commission on Fiscal Responsibility and Reform (Simpson-Bowles Commission) said in its Dec. 2010 report “The Moment of Truth,” available at fiscalcommission.gov:
"The corporate income tax, meanwhile, hurts America’s ability to compete. On the one hand, statutory rates in the U.S. are significantly higher than the average for industrialized countries (even as revenue collection is low), and our method of taxing foreign income is outside the norm. The U.S. is one of the only industrialized countries with a hybrid system of taxing active foreign-source income. The current system puts U.S. corporations at a competitive disadvantage against their foreign competitors… Tax reform should lower tax rates... and make America the best place to start a business and create jobs... The results of inaction are undesirable: the loss of American jobs."
Dec. 2010 - National Commission on Fiscal Responsibility and Reform (Simpson-Bowles Commission)
Laura D'Andrea Tyson, PhD, S.K. and Angela Chan Chair in Global Management at the University of California at Berkeley, in a Mar. 9, 2013 article for the New York Times titled "The Merits of a Corporate Tax Overhaul," wrote:
"The high corporate tax rate in the United States encourages American companies to invest in production in foreign countries and discourages foreign companies from investing in production in the United States. And less investment in the United States means slower growth, fewer jobs, smaller productivity gains and lower real wages."
Mar. 9, 2013 - Laura D'Andrea Tyson, PhD
Alana Semuels, MSc, staff writer at The Atlantic, in her Oct. 20, 2016 article for The Atlantic titled "Would Cutting Corporate Tax Rates Really Grow the Economy?," wrote:
"[C]utting taxes doesn't necessarily mean that companies will create jobs - they could just hold onto the extra cash or distribute the profits to shareholders and those at the top...
[L]owering the corporate tax rate alone won't necessarily make any difference - there are plenty of other things that shape where companies choose where to locate - an educated workforce, a robust regulatory regime, and access to capital among them. Second, it's entirely possible that companies can move somewhere for a low tax rate and still create little economic activity and few jobs there. Third, lowering taxes can lead to a race to the bottom in which many countries compete to lower their taxes... Indeed, the U.S. would see dramatically lower revenues if it lowered its corporate tax rate."
Oct. 20, 2016 - Alana Semuels, MSc
Frank Clemente, Executive Director of Americans for Tax Fairness, wrote in his Dec. 12, 2016 op-ed "Corporate Welfare Won't Create Jobs," available at nytimes.com:
"[L]owering corporate taxes won’t prompt firms to create American jobs. Instead, we need to close a major tax loophole that actually creates an incentive for multinationals to shift jobs offshore, even as it substantially lowers taxes for them.
That loophole, known as deferral, lets corporations avoid paying any United States taxes on their offshore profits until they are brought back here. That's why, according to a recent survey by tax researchers, Fortune 500 companies are holding nearly $2.5 trillion in profits that are booked offshore, mostly in tax havens, on which no United States taxes have been paid… [A]s with many other American multinationals, cutting federal taxes wouldn't affect their investment and employment decisions because they already pay very little...
Corporate tax cuts do not create a great many jobs. Another study found that every dollar reduction in corporate taxes adds only 32 cents to the economy. The same dollar spent on infrastructure generates $1.44 of economic activity. America's corporate tax rate is not discouraging foreign corporations and individuals from investing here. Their investments in the United States for last year alone reached $348 billion, a record high. The corporate clamor for tax cuts has nothing to do with job creation. It’s about lining the pockets of corporate executives and wealthy shareholders through ever-higher dividends and ever-bigger stock buybacks."
Dec. 12, 2016 - Frank Clemente
James Livingston, PhD, Professor of History at Rutgers University, said in his Apr. 14, 2013 article "If Companies Are People..." at nytimes.com:
"The now-familiar objection to a tax increase on corporate profits is that it will discourage private investment and thus dampen job creation. The retort is just as obvious: since when have tax cuts on corporate profits led to increased investment, faster job creation and higher per capita consumption out of rising real wages? It didn’t happen after the Reagan Revolution, it didn’t happen during the Clinton boom of the 1990s, and it sure didn’t happen under George W. Bush. Nor is it happening now, as corporate profits soar and full-time job creation languishes. American corporations are now sitting on $4.75 trillion in cash, according to the Federal Reserve Bank of St. Louis.
The other well-worn objection to an increase of corporate income taxes is that it would encourage companies to invest and hire overseas, where tax rates are presumably lower. Here, too, the retort is obvious: the tax code already works exactly this way by postponing taxes until profits from investment overseas are repatriated. American companies routinely avoid taxation by moving their idle cash offshore."
Apr. 14, 2013 - James Livingston, PhD
Warren Buffett, MS, Chairman and CEO of Berkshire Hathaway, stated the following in a Jan. 23, 2012 article "Warren Buffett Is on a Radical Track" available at time.com:
"The idea that American business is at a big disadvantage against the rest of the world because of corporate taxes is baloney in my view. In the 50s and 60s, corporate taxes were 52%, and we were making all kinds of [job] gains."
Jan. 23, 2012 - Warren Buffett, MS
Michael Mazerov, MBA, Senior Fellow at the Center on Budget and Policy Priorities, said in his Sep. 14, 2010 paper "Cutting State Corporate Income Taxes Is Unlikely to Create Many Jobs" at cbpp.org:
"Corporate income taxes are important sources of revenue that states use to fund public services, including services essential to long-term economic growth like education, infrastructure, health care, and public safety… A number of gubernatorial candidates have made corporate tax cuts key planks of their campaign platforms. This continues a trend of the past couple of years, during which policymakers in several states have proposed cutting corporate income tax rates — or even eliminating the tax completely — as a strategy for stimulating economic growth and creating jobs. These proposals, however, offer false hope. Corporate income tax cuts are unlikely to have a positive impact on a state’s rate of economic growth or the pace at which it generates private-sector jobs."
Sep. 14, 2010 - Michael Mazerov, MBA
The Congressional Budget Office wrote in its Jan. 2008 paper "Options for Responding to Short-Term Economic Weakness" on cbo.gov:
"The most common form of a general cut in business taxes is a reduction in the corporate tax rate. This approach, however, is not a particularly cost-effective method of stimulating business spending: Increasing the after-tax income of businesses typically does not create an incentive for them to spend more on labor or to produce more, because production depends on the ability to sell output."
Jan. 2008 - Options for Responding to Short-Term Economic Weakness (373KB)
Congressional Budget Office
Rana Foroohar, Assistant Managing Editor at TIME magazine, said in her Feb. 23, 2012 article "Why Lower Corporate Taxes Won’t Create More Jobs," available at time.com:
"[T]he corporate tax debate and the jobs debate are two separate things... America has the second highest corporate tax rate in the rich world. But most American businesses don’t pay it. The President is suggesting that the corporate tax rate drop from 35% to 28%. But few of the biggest US businesses are paying that rate right now; indeed, most are paying much less – 115 of the companies in the S & P 500 paid less than 20% in tax over the last five years. And 39 firms paid less than 10%... That gets at the key issue: Fundamentally, lower taxes aren’t the reason that businesses choose to invest or not... Consider the recently released Harvard Business School study looking at insourcing and outsourcing decisions among 10,000 alumnae who are running American businesses. The key reason for outsourcing wasn’t labor cost, but a combination of cost, proximity to market, and (most importantly) better worker skill sets abroad. In order for America to create jobs at home, we need to do the heavy lifting to reform education and develop workers who can do the sort of jobs businesses need them to do... Nobody ever stopped investing because of high taxes."
Feb. 23, 2012 - Rana Foroohar
Mark Cuban, owner of the NBA basketball franchise Dallas Mavericks, said in his Nov. 15, 2011 blog post "My Views on Corporations & Taxes," available at The Mark Cuban Weblog:
"Companies hire because they need people to compete and keep customers happy, not because of lower tax rates. The same principle applies to hiring. It is incredibly expensive to hire people. You hire people because you need them. You don’t hire them because your taxes are lower. You don’t hire them because you just repatriated cash from a foreign country. You hire them because you have a specific need for them. They are going to help you become more profitable, more productive, more competitive, whatever the reason. No one hires people simply because they have some more cash in the bank... Bottom line is that while CEOs of public companies and financial engineers have good reasons to ask for lower taxes, I don’t see lower taxes creating jobs."
Nov. 15, 2011 - Mark Cuban