President Joe Biden and congressional policymakers have proposed several changes to the corporate income tax, including raising the rate from 21 percent to 28 percent and imposing a 15 percent minimum tax on the book income of large corporations. The proposals are being considered to raise revenue for new spending programs and would repeal changes to the corporate tax made by the Tax Cuts and Jobs Act (TCJA) in late 2017.
An increase in the federal corporate tax rate to 28 percent would raise the U.S. federal-state combined tax rate to 32.34 percent, highest in the OECD and among Group of Seven (G7) countries, harming U.S. economic competitiveness and increasing the cost of investment in America. 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.
Author(s): Garrett Watson, William McBride
Publication Date: 24 February 2021
Publication Site: Tax Foundation