Matching Canada’s corporate tax rate would boost the United States’ economy by 4.3 percent over the long-term, according to a new Tax Foundation report.
At 35 percent, the U.S. corporate income tax rate is one of the highest in the developed world. Cutting the tax to the developed world’s average of 25 percent would boost the economy. Cutting the tax even further, to match the United Kingdom’s 20 percent rate or Canada’s 15 percent rate, would be even better.
At Canada’s rate, workers in the U.S. would benefit from 786,000 new jobs and a 3.6 percent raise in wages. Americans at all income levels would benefit, with an average income boost of about 4 percent. Low income Americans would see the highest raises, in terms of percentage.
“It is well known that the 35 percent U.S. corporate tax rate is the highest among the largest industrialized countries,” writes Scott Hodge, the report’s author. “When the federal rate is combined with the average rate of the states, the U.S. imposes third-highest overall corporate tax rate in the world. To the extent that America is suffering from an increase in base erosion, corporate inversions, or the flight of intellectual property, our uncompetitive corporate tax rate is the root of those problems.”
Individual income, payroll and excise tax revenues would rise as a result of the economic benefits. Still, overall tax revenue would decline by about $84 billion per year in the tenth year after the cuts. The loss in tax revenue would be a more manageable $33 billion per year if the corporate income tax rate were cut to the developed world average of 25 percent.
