Pro & Con Quotes: Does Lowering the Federal Corporate Income Tax Rate Create Jobs?
General Reference (not clearly pro or con)
Claire Williams, Morning Consult reporter, in an Apr. 7, 2021 article, “More Than 3 in 5 Voters Support Corporate Tax Hike to Fund Biden’s Infrastructure Plan,” available at morningconsult.com, stated:
“President Joe Biden’s proposed corporate tax hike to fund his $2 trillion infrastructure plan has drawn skepticism from some moderate congressional Democrats and unified opposition from Republican lawmakers.
While raising the corporate tax rate to 28 percent from 21 percent will likely be heavily debated among policymakers in the coming weeks, a new Morning Consult/Politico poll finds that voters are mostly fine with increasing taxes on corporations to fund infrastructure improvements.
Sixty-five percent of registered voters said they strongly or somewhat support funding Biden’s infrastructure plan through 15 years of higher taxes on corporations, while 21 percent somewhat or strongly oppose it…
While the new poll doesn’t mention a specific level of taxation, the concept of raising taxes on corporations to fund Biden’s infrastructure plan is overwhelmingly backed by Democratic voters, with 85 percent support. Just 4 percent of Democrats said they oppose the tax hike.
Republican voters were nearly split: 42 percent back the president’s plan to raise corporate taxes, while 47 percent oppose it. Independents were much more likely to support funding the infrastructure plan through corporate tax hikes (60 percent) than not (21 percent).
When voters were presented with the choice between making improvements to America’s infrastructure funded through increases to the corporate tax or improving infrastructure only if it were done without the tax increases, 53 percent backed the former option.”Apr. 7, 2021
Julia Kagan, Senior Editor of Investopedia.com, in a Feb. 6, 2021 article, “Corporate Tax,” available at investopedia.com, stated:
“A corporate tax is a tax on the profits of a corporation. The taxes are paid on a company’s taxable income, which includes revenue minus cost of goods sold (COGS), general and administrative (G&A) expenses, selling and marketing, research and development, depreciation, and other operating costs.
Corporate tax rates vary widely by country, with some countries considered to be tax havens due to their low rates. Corporate taxes can be lowered by various deductions, government subsidies, and tax loopholes, and so the effective corporate tax rate, the rate a corporation actually pays, is usually lower than the statutory rate; the stated rate before any deductions…
The federal corporate tax rate in the United States is currently a flat 21%, as a result of the Tax Cuts and Jobs Act (TCJA), which President Donald Trump signed into law in 2017 and which went into effect in 2018. Previously, the maximum U.S. corporate income tax rate was 35%.”Feb. 6, 2021
The Groundwork Collaborative, in an Apr. 2021 report, “Progressive Policies Are Good for the Economy: Raise Corporate Taxes,” available at groundworkcollaborative.org, stated:
“Low taxes on the wealthy and corporations contribute directly to our weak and precarious economy by magnifying inequality—concentrating economic resources and power, undermining democracy, and suppressing consumer demand. 50 years of failed trickle-down tax policy has left the United States with insufficient revenues, anemic economic growth, and skyrocketing inequality—and the 2017 Trump tax bill only magnified these problems. A recent report found that 55 corporations paid $0 in federal taxes on 2020 profits. Corporations can and should pay more.
Congress should act now to increase corporate tax rates, close corporate loopholes, and fix our broken international tax system. Doing so will not only pay for needed investments: raised corporate taxes will directly counter damaging inequality, rebalance power in our economy, and are a critical step toward advancing racial equity and reducing racial and gender income and wealth gaps.
Adequately taxing corporations can narrow racial income and wealth gaps and reduce economic inequality: The majority of corporate stock owned by people in the U.S. is held by people in the top one percent, and nearly 90 percent is held by the top 10 percent. Almost 90 percent of corporate equities and mutual shares are owned by white families, while just one percent is owned by Black families. Furthermore, corporations continue to pay less in taxes, even while their profits rise. Taxing this income is tantamount to curbing the increasing power of corporations and the very wealthy—predominantly white families who reap economic benefits—and to narrowing income and wealth gaps along racial, ethnic, and economic lines.”Apr. 2021
The Biden Administration, in an Aug. 19, 2021 statement, “Fact Sheet: The Build Back Better Agenda Will Provide Greater Tax Fairness for Small Businesses,” available at whirehouse.gov, stated:
“The current tax system unfairly prioritizes large multinational corporations over Main Street American small businesses. Small businesses don’t have access to the army of lawyers and accountants that allowed 55 profitable large corporations to avoid paying any federal corporate taxes in 2020, and they cannot shift profits into tax havens to avoid paying U.S. taxes like multinational corporations can. U.S. multinationals report 60 percent of their profits abroad in just seven low tax jurisdictions that, combined, make up less than 4 percent of global GDP. These corporations do not make money in these countries; they just report it there to take a huge tax cut. In 2018, married couples making about $150,000 working at their own small business paid over 20 percent of their income in federal income and self-employment taxes. By contrast, U.S. multinational corporations paid less than 10 percent in corporate income taxes on U.S. profits…
President Biden has laid out a comprehensive tax reform plan to level the playing field, address the concerns of small business owners, and raise revenue that will help pay for new programs for Main Street. The President’s plan will:
Raise the corporate income tax rate to 28 percent.”Aug. 19, 2021
Chuck Marr, MBA, Senior Director of Federal Tax Policy, Samantha Jacoby, JD, Senior Tax Legal Analyst, George Fenton, PHD, Senior Policy Analyst, and Sam Washington, Research Assistant, all at the Center on Budget and Policy Priorities, in a May, 25 2021 article, “Corporate Rate Increase Would Make Taxes Fairer, Help Fund Equitable Recovery,” available at cbpp.org, stated:
“–First, raising taxes on corporations would make the tax code more progressive while helping to generate the revenue needed to help finance investments that would promote an equitable recovery;May, 25 2021
–Second, the dramatic corporate tax cuts of 2017 provided few benefits to the economy in general and to low- and middle-income households in particular;
–Third, raising corporate taxes by a modest amount will not undermine the economic recovery and, in fact, using those revenues to finance needed investments will help make the economy stronger; and
–Fourth, reducing the favorable tax treatment for offshore profits and investments, which the 2017 law largely did not do, would ensure that U.S. multinationals pay their fair share while positioning the United States as a leader in global tax negotiations.”
Jeff Bezos, founder and CEO of Amazon.com, in an Apr. 6, 2021 statement available on aboutamazon.com, stated:
“We support the Biden Administration’s focus on making bold investments in American infrastructure. Both Democrats and Republicans have supported infrastructure in the past, and it’s the right time to work together to make this happen. We recognize this investment will require concessions from all sides—both on the specifics of what’s included as well as how it gets paid for (we’re supportive of a rise in the corporate tax rate). We look forward to Congress and the Administration coming together to find the right, balanced solution that maintains or enhances U.S. competitiveness.”Apr. 6, 2021
Jason Furman, PhD, Economics Professor at Harvard University, in a Jan. 28, 2020 chapter, “How to Increase Growth while Raising Revenue: Reforming the Corporate Tax Code,” included in “Tackling the Tax Code: Efficient and Equitable Ways to Raise Revenue,” available at brookings.edu, stated:
“This chapter proposes reforms to business taxes that would address some of the challenges facing the current system. These challenges include historically low revenue collections, instability, distortions, failure to address positive spillovers from research and development, and failure to address the increased returns to corporations that derive from their monopoly power. The proposal would raise the corporate tax rate from 21 percent to 28 percent, require large pass-through businesses to file as C corporations, and close other loopholes. In addition, it would expand incentives for new investment by allowing businesses to expense all their investment costs and get a nearly 50 percent larger credit for their research and development spending. The proposal would raise the long run level of GDP by at least 5.8 percent, adding at least 0.2 percentage point to annual GDP growth over the next decade. The combination of tax increases and additional growth would raise $1.1 trillion over the next decade and 1.1 percent of GDP in steady-state. The middle quintile of the income distribution would see a 3.5 percent increase in its after-tax income after taking into account the uses of the money raised. The overall gain to society in the long run would be about a 5.0 percent increase in well-being.”Jan. 28, 2020
The US Department of the Treasury, in an Apr. 2021 report, “The Made in America Tax Plan,” available at home.treasury.gov, stated:
“The Made in America tax plan will increase the corporate tax rate from 21 percent to 28 percent. This increase maintains a tax rate on corporate profits which is approximately 7 percentage points below the rate that was in place from the late 1980s until 2017, and it is paired with attendant reforms designed to promote competitiveness and reward productive investments.
As noted above, the United States raises less corporate tax revenue (as a share of GDP) than almost all of the advanced economies in the OECD. Raising the corporate income tax rate would modestly increase corporate revenues relative to GDP, still leaving them below those of our trading partners.
In addition to raising revenue to fund urgent fiscal priorities, raising the corporate income tax rate would also help attenuate inequality. The corporate income tax is one of the most progressive taxes in our tax system. Also, the corporate tax is an essential lever for taxing capital in general, serving as a critical backstop to ensure that capital is taxed at least once; in the absence of the corporate tax, a substantial share of capital income would escape taxation altogether.”Apr. 2021
Parker Sheppard, PhD, Research Fellow for Dynamic Modeling and Simulations in the Center for Data Analysis at the Institute for Economic Freedom of The Heritage Foundation, in an Apr. 15, 2021 article, “The Long-Run Economic Effects of Raising the Corporate Tax Rate to 28 Percent,” available at heritage.org, stated:
“The proposal to raise the corporate income tax is motivated in part by a desire to pay for $2.65 trillion in spending over the 10-year budget window. Many of the provisions in the American Jobs Plan, such as building energy-efficient housing and producing electric vehicles, are things that the private sector is already doing. Providing public funding for those activities and raising corporate taxes merely produces the same goods at a higher cost.
Taxes lead to market distortions and inefficiencies as households and businesses adjust to the costs that they impose. The reduction in trade benefits no one, as the government cannot collect tax revenue on income that is not produced. Technically speaking, the reduction in welfare from lost gains in trade is referred to as deadweight loss. Deadweight loss measures the increase in welfare that would have accrued to producers or consumers, but did not happen because the gain from trade was not high enough to pay for the tax levied on it. The best policy to promote prosperity for all households in the United States is to keep taxes low and to keep spending in line with revenue.”Apr. 15, 2021
Joshua Bolten, JD, Business Roundtable President and CEO, as quoted by Thomas Franck, in a Sep. 28, 2021 article, “Top CEOs say they’re worried about corporate tax hikes as Dems push bills aimed at boosting working families,” available at cnbc.com, stated:
“Increasing taxes on America’s largest job creators by almost $1 trillion—nearly three times the net corporate tax cut from 2017 tax reform—would be one of the largest corporate tax increases in history. Tax increases on job creators would make it harder for U.S. companies to compete and would hinder investment in America.”Sep. 28, 2021
Caroline L. Harris, JD, former Vice President of Tax Policy and Economic Development and former Chief Tax Policy Counsel at the US Chamber of Commerce, in a Jan. 27, 2021 article, “The Case for Preserving a Competitive Corporate Tax Rate,” available at uschamber.com, stated:
“Raising the corporate rate would derail economic recovery since higher corporate income taxes harm economic growth and, ultimately, hurt workers… Corporate income taxes are the most harmful for economic growth. Further, the burden of corporate taxes falls most heavily on workers. High corporate tax rates divert investment away from the corporate sector, curtailing investment that would raise the productivity of American workers and increase those workers’ real wages. Studies estimate that labor likely bears about 70% of the burden of the corporate income tax. In other words, raising the U.S. corporate tax rate is a bad idea at any time given its impact on growth and real wage levels. Undertaking this worldwide to globally slow growth and lower real wages is simply a bad idea on a larger scale…
Raising the corporate tax rate would make our tax system less competitive.
The current U.S. combined statutory corporate tax rate is 25.9% (21% federal corporate income tax rate plus a 4.9% average state corporate income tax rate). This rate is still above the worldwide average combined corporate income tax rate, measured across 177 jurisdictions, of 23.85%, and the OECD rate of 23.5%. In fact, raising the 21% rate to 28% would give the United States the highest combined corporate tax rate in the OECD. This is not how we want America to be #1.”Jan. 27, 2021
Garrett Watson, Senior Policy Analyst, and William McBride, PhD, Vice President of Federal Tax and Economic Policy, both of the Tax Foundation, in a Feb. 24, 2021 article, “Evaluating Proposals to Increase the Corporate Tax Rate and Levy a Minimum Tax on Corporate Book Income,” available at taxfoundation.org, stated:
“An increase in the federal corporate tax rate to 28 percent [from 21%] would raise the U.S. federal-state combined tax rate to 32.34 percent, highest in the OECD and among Group of Seven (G7) countries, harming U.S. economic competitiveness and increasing the cost of investment in America. We estimate that this would reduce long-run economic output by 0.8 percent, eliminate 159,000 jobs, and reduce wages by 0.7 percent. Workers across the income scale would bear much of the tax increase. For example, the bottom 20 percent of earners would on average see a 1.45 percent drop in after-tax income in the long run…
Raising the U.S. corporate income tax rate would erode America’s international tax competitiveness, giving us the highest combined corporate tax rate in the OECD. Such a relatively high corporate tax rate would encourage profit shifting abroad and otherwise out of the U.S. corporate sector.”Feb. 24, 2021
Adam A. Millsap, PhD, Senior Fellow for Economic Opportunity Issues at Stand Together and the Charles Koch Institute, in an Apr. 28, 2021 article, “Higher Corporate Taxes Affect Everyone,” available at forbes.com, stated:
“[T]here is plenty of evidence that raising corporate income taxes affects all workers by reducing wages, slowing employment growth, and impeding innovation.
Federal corporate income tax changes are relatively rare, but with 50 states there is a lot of change and variation at the state level. Rates vary from a high of 11.5% in New Jersey to a low of 2.5% in North Carolina. Economists have studied state corporate tax changes for decades, and several studies over the last 15 years find that state corporate tax increase have adverse economic consequences…
There is strong evidence that corporate tax increases cause worse economic outcomes at the state level. At a time when unemployment claims remain high and thousands of firms are still in survival mode, it seems imprudent to raise corporate taxes at the federal or state level.”Apr. 28, 2021
Erica York, economist, and Alex Muresianu, Federal Policy Analyst, both of the Tax Foundation, in an Apr. 21, 2021 article, “Raising the Corporate Rate to 28 Percent Reduces GDP by $720 Billion Over Ten Years,” available at taxfoundation.org, stated:
“Using the Tax Foundation General Equilibrium Model, we estimate the long-run impact of a 28 percent corporate income tax rate [a raise from 21%] would be a 0.7 percent reduction in GDP, amounting to about $160 billion (in today’s dollars) of lost output each year. Similarly, the level of American incomes (measured by Gross National Product, GNP), the capital stock, wages, and full-time equivalent employment would also be lower…
The $720 billion in lost GDP over 10 years slightly exceeds the estimated $694 billion of tax revenue that would be raised over 10 years after accounting for the smaller economy. For instance, in year 10, the economy would be about $137 billion lower, and the government would raise about $65 billion of revenue—implying about $2.10 of output lost for each dollar of dynamic revenue raised (or about $1.34 using conventional revenue) in the 10th year…
Corporate income taxes are one of the most harmful ways to raise revenue. They place a higher burden on investment, reduce economic output, and reduce after-tax incomes across the income spectrum—negative economic effects that compound over time.”Apr. 21, 2021
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