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News from EPI Cutting Corporate Taxes Won’t Help the Economy

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Cutting corporate taxes will do nothing to spur economic growth, according to a new paper from EPI Director of Budget Research Tom Hungerford. In Corporate Tax Rates and Economic Growth Since 1947, Hungerford find no evidence that high corporate taxes have a negative impact on the economy. In fact, there is no correlation at all between corporate tax rates and economic growth.

“The corporate income tax raises a significant amount of revenue. It contributes to the overall progressivity of the tax code and prevents individuals from using corporations as tax shelters,” said Hungerford. “Since the corporate income tax serves several important functions, and since lower rates won’t boost economic growth, there’s no reason to cut or eliminate the tax as part of a reform deal.”

The U.S. corporate income tax is no more burdensome to businesses than the taxes of other industrialized countries, nor is it impeding corporate profits, which are at a post-World War II high. While the United States has high statutory rates, its effective corporate income tax rate of 27.7 percent is close to the average for rich nations (27.2 percent, weighted by GDP). Rates are also not high by historic standards—the statutory corporate tax rate has gradually been reduced from over 50 percent in the 1950s to its current 35 percent.