Depending on the outcome of the 2024 US elections, the current corporate TaxA tax is a compulsory payment or levy imposed by local, state, and national authorities on individuals or businesses to cover the costs of general government services, goods, and activities.
The 21 percent corporate tax rate could change. The 21 percent rate introduced by the 2017 tax reform brought the U.S. tax rate, which for years was the highest, up to the level of other developed countries. The tug-of-war over the level of the corporate tax rate has a significant impact on companies planning their future domestic investments. It creates additional uncertainty in the short term and affects the profitability of projects in the long term.

The tax rates considered by former President Donald Trump (20 percent and 15 percent respectively) and current Vice President Kamala Harris (currently 28 percent, previously up to 35 percent) would have completely different effects on the economy.

Using the Tax Foundation’s general equilibrium model, we estimate that, in the extreme case, raising the corporate tax rate to 35 percent would shrink the U.S. economy by nearly 1.4 percent and employment by 289,000 jobs. On a conventional basis, this would raise $2.2 trillion; on a dynamic basis, it would be $1.6 trillion, taking into account how a smaller economy with lower incomes would shrink other tax revenues.

At the other end of the spectrum, cutting the tax rate to 15 percent would grow the U.S. economy by just over 0.4 percent. On a conventional basis, that would result in a tax reduction of $673 billion, and on a dynamic basis, $459 billion, when taking into account how the overall economy and higher incomes would increase other tax revenues.

The next president will face difficult choices and trade-offs on tax policy because the individual provisions of the 2017 tax reform do not expire until 2025 (and a full extension would reduce revenue by more than $4 trillion) and because the federal budget is already on an unsustainable path before he considers $4 trillion in tax cuts. But the need for higher revenue is not a free pass to enact the most damaging kinds of tax increases.

Studies have shown that the Corporate taxA corporate income tax (CIT) is levied by the federal and state governments on corporate profits. Many companies are not subject to CIT because they are taxed as pass-through entities and their income must be reported as part of the income tax.
Is The The corporate tax is the most damaging tax for economic growth. Recent analyses now confirm the benefits of cutting the corporate tax rate. They conclude that the TCJA corporate tax reform has led to a significant increase in domestic investment.

A key result of our modeling is that the “harm per dollar” of a corporate tax rate increase is just as great for a small tax increase as it is for a large tax increase. The adjacent chart illustrates how a higher corporate tax reduces economic output by roughly the same amount per billion in revenue. While the percentages in the chart may seem small, they add up to the total economic impact shown in the first chart, and they apply to the entire size of the U.S. economy, which is currently $28.6 trillion.

A higher corporate tax rate would raise revenues, but all revenue would come at a high price: lost economic output, investment, and wage growth. Rather than turning to one of the most economically damaging tax increases, lawmakers should eliminate wasteful tax spending and Tax baseThe tax base is the total amount of income, wealth, assets, consumption, transactions or other economic activities taxed by a tax authority. A narrow tax base is not neutral and is inefficient. A broad tax base reduces the cost of tax administration and allows for higher revenues at lower tax rates.
to generate revenue.

The TCJA has permanently reduced the corporate tax rate and made the United States a much more attractive place to invest. At 21 percent, the U.S. corporate tax rate is now about the average for developed countries. Further changes to the corporate tax should also focus on improving investment and innovation incentives, which precludes a higher corporate tax rate to raise revenue and is best achieved by Cost coverageCost recovery is the ability of companies to recover (deduct) the costs of their investments. It plays an important role in defining a company’s tax base and can influence investment decisions. When companies cannot fully deduct capital expenditures, they spend less on capital, which reduces employee costs.‘S Productivity and wages.
improvements.

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