TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, April 24, 2018

Hungerford: History Shows That GOP's Corporate Tax Cuts Are Unlikely To Spur Economic Growth

Thomas L. Hungerford, Latest Tax Cuts: History Belies Promise of Growth:

One provision of The Tax Cuts and Jobs Act (TCJA; P.L. 115–97), enacted on December 22, 2017, dramatically reduces the statutory corporate tax rate from 35 percent to 21 percent. It is projected to cost the U.S. Treasury over $1.3 trillion over the next 10 years. Given widespread Republican concerns about federal budget deficits just eight years ago, it seems odd to call for tax changes that lower rates, reduce tax revenue, and increase deficits. The putative impetus for these calls is the belief that the statutory corporate income tax rate is too high–providing an excessive burden on U.S. corporations that leads to poor economic performance. This article examines corporate income-tax rates between 1946 and 2016 (before TCJA), and the argument linking low corporate tax rates with higher economic growth. This analysis finds no evidence that high corporate tax rates have a negative impact on economic growth. The new lower corporate income-tax rate is unlikely to spur economic growth.



(Hat Tip: Bruce Bartlett.)

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