While we support a full elimination of the corporate income tax, lowering it to 20 percent is a huge step in the right direction for our nation’s economy.
President Trump and congressional Republicans should be applauded for their efforts to reform the nation’s tax code. In particular, they should be given credit for tackling the problem of the corporate income tax. While we support a full elimination of the tax, lowering it to 20 percent is a huge step in the right direction for our nation’s economy.
The United States has the fourth-highest corporate income tax in the industrialized world with a rate of 35 percent. The worldwide average is just above 22 percent. By lowering our rate to 20 percent, business will stop being driven offshore to lower tax countries. Companies can also stop looking for ways to avoid paying the punitive U. S. rate. Instead, this new lower rate will put us “back in the game,” bringing business, manufacturing, capital investments and company headquarters back to the United States.
Capital today is more mobile than ever. The environment of the world at one time was that capital investments were only secure in places like the United States. That cannot be said today. Companies are willing to invest worldwide, looking for the best environment to do so. Lowering the tax rate will welcome business back to the United States instead of driving it away because of the government’s high tax rate.
In 2011, the Tax Foundation based in Washington, D. C., stated that cutting the corporate income tax rate would promote higher long-term economic growth than any other tax change. The foundation cited a report by the Organization for Economic Cooperation and Development that found that the corporate income tax was the most harmful tax for long-term economic growth followed by high personal income tax rates. This is why eliminating, or at least lowering the income tax, on corporations is so critical. If the tax is lowered, the United States will create long-term economic growth, making certain we continue on a path of creating jobs and increasing wages for years to come.
We can see this already from those who are scoring the impacts of the tax proposals being considered by Congress. According to the Tax Foundation models of the legislation, it is expected that the changes for corporations will lead to an increase in the nation’s GDP by 3.9 percent. The model also forecasts that wages will tick up by 3.1 percent and that nearly 1 million new jobs will be created directly due to the tax code updates. Those are significant numbers that cannot be ignored and should be motivation enough for Congress to pass this reform.
Also, the corporate income tax is nothing more than an effort to hide the true cost of government from taxpayers. Corporations don’t really pay taxes they simply pass those cost onto others in various ways such as higher costs to their customers, lower compensation or fewer jobs for their employees and lower dividends to their shareholders. Corporations serve as pseudo tax collectors, burying the true burden of the taxes levied.
Those who oppose this change will try to deceive the public into believing the tax changes are only about helping big corporations. That could not be further from the truth. As the experts who model this are showing, this reform is about jobs — middle-class America jobs. If corporations can pay a lower rate, that will mean higher investments by these companies in our country, higher wages, more economic growth and less wasteful tax avoidance strategies. America will be back in a position to compete with the rest of the world and again demonstrate why our country is the best place to work and live for generations to come.
John Dougall is the Utah State Auditor and the former chair of the Utah House of Representative Revenue & Taxation Standing Committee. Dougall was the House sponsor of Utah’s most recently passed tax reform legislative, implementing a lower 5-percent single rate on individual income.
Howard Stephenson is a State Senator, Senate Chair of the Revenue and Taxation Committee and President of the Utah Taxpayers Association.