Congressional Republicans are moving forward with their tax reform bill, and by leaving the current 21% corporate tax rate alone, their bill will be a win for working people.
In 2017, the U.S. corporate rate was reduced from one of the highest levels in the world to a more competitive 21% rate. This rate was a major accomplishment which has resulted in increased investment, rising wages, and increased global competitiveness.
For the last four years, the Biden administration sought to increase the corporate rate every year. Some Republicans have also called for a higher corporate tax rate, claiming they want to help working people. But working people would be hurt by a higher corporate rate, and they will be major beneficiaries of maintaining the rate at 21%.
Raising the corporate rate would reduce investment and growth, leading to lower wages and fewer jobs. A recent Tax Foundation study shows that increasing the corporate rate by even one percentage point would shrink the economy, leading to smaller incomes for working families.
Numerous studies show that working people would bear a major portion of the burden of a corporate tax rate increase. Some studies show that workers bear up to 70% of the corporate tax burden in the form of lower wages.
A Federal Reserve Board study found that a corporate rate increase would be “uniformly harmful to workers,” and would lead to a “significant reduction in employment and income.” The study found that a rate increase would cost the typical American household thousands of dollars a year in lower wages.
Another study by Kevin Hassett, now the director of the National Economic Council and the former Chairman of the Council of Economic Advisers, reviewed taxes and wages in 66 countries over 25 years and concluded that “higher corporate rates depress wages.” The study estimated that a 1% increase in the corporate rate would result in a 0.5% decrease in wages.
History shows that lower tax rates are the best way to grow the economy and benefit working people. Lower rates increase investment and productivity, leading to higher wages and increased economic output. Tax rate reductions worked in the Kennedy tax cuts in the 1960s and the Reagan tax cuts in the 1980s, with both unleashing years of strong economic growth.
A pro-growth tax bill that keeps rates low will provide the certainty the economy needs to grow and working people will benefit.
Preserving the 21% Corporate Tax Rate Redounds to Workers
May 15, 2025
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