Biden Gets Corporate Taxes Backward

A reduced rate wasn’t a ‘giveaway’ to large firms. It set off an economic boom and increased wages

By Kevin Brady and Douglas Holtz-Eakin. Excerpts:

"the Trump tax cuts were a boon for American workers. The Tax Cuts and Jobs Act of 2017 spurred businesses investment in innovation, technologies, software, equipment and facilities. It also restored U.S. corporations’ international competitiveness by reducing the corporate tax, a stealth levy on workers’ wages.

By dropping the rate to 21% from 35%, Congress set off an economic boom. Coupled with a modern international tax code, the TCJA’s rate cuts drew more investment, research and intellectual property back to the U.S. Each dollar of corporate-tax reduction has been estimated to increase economic production by 44 cents. The TCJA stimulated U.S. investment by 20% among companies experiencing the average tax change. For workers, the 9% increase in inflation-adjusted earnings between Jan. 1, 2018, and Dec. 31, 2020, was the fastest growth since the government began publishing data in 1979. The corporate-rate cut has been the wind at American workers’ backs for years."

"raising the corporate rate to 28% would by 2034 impose a $500 billion tax hike on families making less than approximately $300,000 a year."

"Before 2017 Washington was saddled with the highest corporate-tax rate at 35% and clung to a “worldwide” system of taxation, by which U.S. companies were taxed at home and abroad"

"there was a perverse incentive: The company could defer paying the difference if it didn’t repatriate its profit back to the U.S. To remain competitive, companies locked trillions of dollars in profits offshore."

"The U.S. suffered the exodus of 33 companies between 2005 and 2015. As the Tax Policy Center reports, there have been no major tax-motivated inversions since 2017."

"The average corporate rates in the OECD and European Union are 23.7% and 21%, respectively. It would serve no one except our international competitors if the U.S. reverted to an uncompetitive tax code."

"Corporate-tax revenue today is higher than it was projected to be at the 35% rate."

"If Washington passes a corporate-tax hike, the burden doesn’t stop at a check to the Treasury. It must be financed by one or more of that trio: shareholders, workers and customers. The reverse—higher dividend payments to retirees, better wages for workers and reduced inflation pressures on customers—couldn’t plausibly be considered a giveaway."