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Monday, June 17, 2013

Hungerford: Corporate Tax Rates and Economic Growth Since 1947

Economic Policy Institute:  Corporate Tax Rates and Economic Growth Since 1947, by Thomas L. Hungerford:

This brief examines corporate income-tax rates, and the argument linking low corporate tax rates with higher economic growth. The principal findings are:

  • Claims that the United States’ corporate tax rate is uniquely burdensome to U.S. business when compared with the corporate tax rates of its industrial peers are incorrect. While the United States has one of the highest statutory corporate income-tax rates among advanced countries, the effective corporate income-tax rate (27.7 percent) is quite close to the average of rich countries (27.2 percent, weighted by GDP).
  • The U.S. corporate income-tax rate is 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.
  • The current U.S. corporate tax rate does not appear to be impeding corporate profits. Both before-tax and after-tax corporate profits as a percentage of national income are at post–World War II highs; they were 13.6 percent and 11.4 percent, respectively, in 2012.
  • Lowering the corporate income-tax rate would not spur economic growth. The analysis finds no evidence that high corporate tax rates have a negative impact on economic growth (i.e., it finds no evidence that changes in either the statutory corporate tax rate or the effective marginal tax rate on capital income are correlated with economic growth).
 Chart 3

(Hat Tip: Citizens for Tax Justice.)

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