What Would Happen to the U.S. Economy If We Had Another Country’s Corporate Tax Rate?

See The Economic Effects of Adopting the Corporate Tax Rates of the OECD, the UK, and Canada by Scott A. Hodge of the Tax Foundation. Summary:

"Washington, DC (Aug 21, 2015)—Policymakers in Washington are currently discussing ways to improve U.S. competitiveness in the global economy, and there are a lot of options on the table. Some proposals include converting to a territorial tax system or creating an “innovation box” to lower the tax rate on patents and intellectual property. However, policymakers would be wise to remember that one of the most important factors in international competitiveness is the corporate income tax rate, and that, at 35 percent, the U.S. has the highest rate in the industrialized world.
 

A lower corporate rate would certainly lessen the tax code’s sticker shock, but how would it affect federal revenue, job growth, wages, or GDP? To answer this question, a new report from the nonpartisan Tax Foundation examines what would happen to our economy if U.S. corporations faced tax rates similar to those in other developed countries.

Using the Taxes and Growth (TAG) Model, the report simulates the economic benefits and budgetary costs of reducing the corporate rate from 35 percent to the OECD average of 25 percent, the UK’s rate of 20 percent, and Canada’s federal rate of 15 percent.

The report’s key findings include:

• Reducing the corporate income tax rate to 25 percent would increase long-term GDP by 2.3; a cut to 20 percent would boost long-term GDP by 3.3 percent; and a cut to 15 percent would increase long-term GDP by 4.3.
• Workers would also benefit from a corporate rate reduction. Depending on the reduction’s size, we would expect to see an additional 425,000 to 613,000 new jobs. Wages would increase by between 1.9 percent and 3.6 percent over the long-term. 
• Regardless the size of the corporate tax cut, the larger GDP would translate into higher after-tax incomes for taxpayers up and down the income scale.
• Using conventional scoring, these rate reductions would cost between $1.2 and $2.5 trillion over the next ten years. However, using the more realistic assumption that these cuts would increase the size of GDP, the reductions would cost between $746 billion to $1.5 trillion over the next decade.

“When 35 percent federal corporate rate is combined with the average state corporate, the U.S. imposes third-highest overall corporate tax rate in the world,” said Tax Foundation President Scott Hodge. “To the extent that America is suffering from an increase in base erosion, corporate inversions, or the flight of intellectual property, our uncompetitive corporate tax rate is the root of those problems. Policymakers looking to improve our standing on the international stage would be wise to address it.”

Full report: The Economic Effects of Adopting the Corporate Tax Rates of the OECD, the UK, and Canada"