The Benefits of Cutting the Corporate Income Tax Rate
Jacquelyn Himes, CPA
Focused on You. Dedicated to Your Success.
October 29, 2018

According to a report published by the Tax Foundation on August 14, 2018, there are many benefits to the decrease in the corporate tax rate. The Tax Cuts and Job Act (TCJA) permanently lower federal corporate income tax rate, which decreased from 35 percent to 21 percent. As a result:

  • A corporate income tax rate closer to that of other nations will discourage profit shifting to lower-tax jurisdictions.
  • New investment will increase the size of the capital stock. Productivity, output, wages, and employment will grow. The Tax Foundation Taxes and Growth model estimates that the total effect of the new tax law will be a 1.7 percent larger economy, leading to 1.5 percent higher wages, a 4.8 percent larger capital stock, and 339,000 additional full-time equivalent jobs in the long run.
  • Reducing the corporate income tax will benefit workers as new investments boost productivity and lead to wage growth.
 
The Tax Foundation claims that if lawmakers raised the corporate income tax rate from 21 percent to 25 percent, the tax increase would shrink the long-run size of the economy by 0.87 percent, or $228 billion. This would reduce the capital stock by 2.11 percent, wages by 0.74 percent, and lead to 175,700 fewer full-time equivalent jobs.

Feel free to call any member of our team at 610-828-1900 with questions. You can also contact Jackie Himes, CPA, director – tax services at Jacquelyn.Himes@MCC-CPAs.com or me at Marty.McCarthy@MCC-CPAs.com . We are always happy to help.
Martin C. McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company, PC

Disclaimer This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).