The unintended consequences of corporate tax increases will stifle growth when we need it most

After more than a year of coronavirus-caused closures, the U.S. economy is showing signs of recovery and growth. As businesses re-open, Americans are beginning to travel, dine at restaurants and shop in stores once again.

Unfortunately, a full recovery and stable growth are far from a sure thing. The rapid spread of the Delta variant is creating further instability in the economy, unemployment and inflation remain high, and consumer confidence is down.

In the face of these uncertainties, Congress is considering imposing new and uncompetitive…


A new analysis prepared by the nonpartisan staff of the Joint Committee on Taxation finds that more than 169 million American families earning less than $500,000 would end up paying for the Administration’s proposed increase in corporate taxes. These families would bear two-thirds of the cost of an increase in the corporate tax rate and represent more than 98% of the American households that are made worse off from the increase in corporate taxes.

Even though a corporation physically writes the check to the Internal Revenue Service when it pays its taxes, those costs are passed on to people, just…


Polls often show that people believe tax increases, even if targeted at corporations, will end up hurting middle-class families. And there’s good reason they think that.

Government and academic analyses conclude that everyday people bear the burden of corporate taxes. For example, a 2016 study from then-President Obama’s Treasury Department estimated that those who earn the least experience more economic harm from the corporate income tax than from the individual income tax. …


As policymakers consider changing America’s tax code, they must think through the unintended consequences to these changes and how any modifications would affect the competitiveness of U.S. companies — and the tens of millions of Americans who work for them.

At a recent panel, hosted by the Alliance for Competitive Taxation, three of the nation’s top experts explained what the proposed federal corporate tax increases would mean for American businesses:

“Prior to 2017 kind of everybody agreed that we had to do something. The reason we needed to do something was the acknowledgement that it’s a big world and we’ve…


Between 2018 and February 2020, before the Covid-19 pandemic began, America saw strong economic growth — with jobs, household income and wages all increasing. This period of growth was accelerated by tax reforms that put the U.S. corporate rate in line with other countries.

Thankfully, America is now getting back to work. But we aren’t there yet. A full economic recovery is far from certain. Raising corporate income taxes now would threaten our recovery. Plus, polls show that people understand that they are hurt by higher corporate taxes. …


The U.S. Treasury Department calculates that roughly half of the corporate income tax is borne by families earning less than $400,000 in annual income. These families will bear the cost of any increase in corporate taxes.

Even though a corporation physically writes the check to the Internal Revenue Service when it pays its taxes, a corporation is only a legal fiction — a form of doing business. Just like rent, salaries, and other expenses of doing business, corporations pass the cost of taxes on to people.

All economists agree that people — and not legal entities — bear the cost…


Increased sales in foreign markets yields more jobs at home

Key Takeaways

● The Biden Administration has proposed to levy an additional tax on American companies if they pay a rate of tax less than 26.25% in any foreign country.

● The U.S. is already the only country in the world that imposes a minimum tax on the foreign operations of its companies, known as GILTI. …


Foreign operations of U.S. companies support a variety of jobs in the United States, from R&D to manufacturing to operational and support jobs. When U.S. companies succeed in foreign markets, their success increases demand for the goods and services they produce at home.

In 2018, U.S. exports of manufactured products and other goods by U.S. multinational companies to their foreign affiliates and unrelated foreign customers totaled $834 billion. U.S. companies often use foreign affiliates to do some manufacturing or assembly of products that are too costly or large to transport over long distances, or that must ultimately be installed at…


Global capital markets drive investment funds to countries where they can earn the highest after-tax return. Higher U.S. corporate taxes would cause U.S. investment to fall and reduce the demand for U.S. jobs, resulting in lower wages. According to one assessment from the non-partisan staff of the Joint Committee on Taxation about 25% of a corporate income tax hike would be paid by employees through lower wages. Other analyses find the corporate income tax results in a much larger reduction in wages, with low-skilled workers bearing a disproportionately large reduction in their wages. A 2016 analysis from the Treasury Department…


Raising the 21% corporate tax rate or the U.S. tax on foreign income (GILTI) would make it even more difficult for American companies to compete in global markets. With 95% of the world’s population and 75% of the world’s purchasing power outside the U.S., American companies need to compete and win overseas. If they do not, that will mean fewer U.S. jobs and less investment, because foreign-headquartered companies will take advantage of a tilted playing field to win global market share.

A higher corporate tax rate would make it harder for U.S. companies to compete globally, including with China. Today…

Alliance for Competitive Taxation

The Alliance for Competitive Taxation promotes U.S. jobs, investment and rising incomes through the establishment of a competitive U.S. tax system.

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