The Tax Foundation: “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.”
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As President Biden and congressional policymakers consider changes to the corporate income tax this year to raise revenue and raise tax burdens on U.S. corporations, it is important to remember why the United States updated the tax treatment of corporate income under the TCJA in 2017 and lowered the corporate tax burden: years of slipping American competitiveness particularly regarding corporate tax, corporate inversions to other lower-tax countries including some of our major trading partners, migration to the pass-through sector, and other forms of corporate tax avoidance, plus reduced investment, productivity, and wage growth.
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.
President Biden’s proposed tax hike would reduce American economic output during a time when we need to maximize economic growth to reach our country’s pre-pandemic growth trend and return to full employment. We estimate an increase in the corporate tax rate to 28 percent, for example, would reduce long-run economic output by 0.8 percent, eliminate 159,000 jobs, and reduce wages by 0.7 percent. A 25 percent tax rate would reduce output by 0.4 percent and result in about 84,000 fewer full-time equivalent jobs.