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1 Garrett Watson & William McBride, Evaluating Proposals to Increase the Corporate Tax Rate and Levy a Minimum Tax on Corporate Book Income 1 (2021)

handle is hein.taxfoundation/egpstiete0001 and id is 1 raw text is: Evaluating Proposals to Increase the Corporate Tax Rate and Levy a Minimum Tax on Corporate Book Income FISCAL FACT No. 751 Feb. 2021 Garrett Watson William McBride Senior Policy Analyst Vice President of Federal Tax and Economic Policy The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and global levels. We are a 501(c)(3) nonprofit organization. ©2021 Tax Foundation Distributed under Creative Commons CC-BY-NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Key Findings 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. A minimum tax on the book income of large corporations would target gaps between financial and taxable income that generally exist because the rules for taxation differ from standards for reporting income to shareholders. Such a minimum tax would likely introduce additional complexity and distortions into the tax code and generate relatively little tax revenue, in part because firms have a degree of flexibility in reporting book income. The tax would potentially undermine current-law investment incentives as well as those proposed by President Biden, such as the Made in America tax credit.

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