It is often asserted that if we cut taxes for “job creators,” the benefits will trickle down to working families. But this is untrue, and recent calls to slash corporate rates will not provide any economic benefit to working people. Further, the common claim that the United States’ high statutory corporate rate hurts U.S. businesses’ “competitiveness” does not hold up to scrutiny, according to a new paper from EPI Research Director Josh Bivens and Budget Analyst Hunter Blair. Bivens and Blair argue that “competitiveness” is a near-meaningless concept as it is invoked in corporate tax debates.
“Cutting taxes would make corporations more profitable, but policy needs to focus on larger and more important goals—namely, boosting the incomes of typical American families,” said Bivens. “Any policy proposal needs to be judged on the basis of whether or not it helps the typical American family—and corporate rate cuts do not.”
Bivens and Blair argue that any corporate tax proposal should be evaluated by its effects on employment growth, productivity growth, and income distribution—three determinants of rising living standards for the vast majority. By these measures, there is no reason to cut corporate taxes. Indeed, the central problem with the corporate tax system is that it has become so riddled with loopholes that it raises far too little revenue and threatens to starve the federal government of funds needed to honor existing commitments to social insurance, income support, and public investment. Corporate tax proposals should focus on increasing, not decreasing, the taxes paid by corporations.
Bivens and Blair debunk common claims made by proponents of corporate rate cuts, pointing to the fact that the high statutory tax rates in the United States do not put U.S. corporations at a competitive disadvantage globally, because the effective rate that these corporations actually is already in line with other advanced economies.
“What unites most claims about how we’re harming the economy by overtaxing corporations is that these claims are economically meaningless,” said Blair. “Even if U.S. corporations were paying higher taxes than their peers, the American people have nothing to gain by lowering the rate these companies pay.”