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Lowering the Corporate Tax Rate Would Boost GDP, Add Jobs and Increase Wages

Tax Foundation estimates GDP would increase by 4.3 percent

AP
August 28, 2015

Lowering the corporate income tax rate from 35 percent would not only increase the size of Gross Domestic Product (GDP) but also would add jobs and increase wages, according to calculations from the Tax Foundation.

America’s corporate income tax rate is currently 35 percent, the highest in the industrialized world. The Tax Foundation simulated the economic benefits and budgetary costs of cutting the corporate tax rate to three different rates: 25, 20, and 15 percent.

Reducing the tax rate to 15 percent would increase GDP by 4.3 percent over the long term, according to their calculations. The group also expects that 425,000 to 613,000 new jobs would be added and wages could increase between 1.9 and 3.6 percent over the long term, depending on the size of the tax cut.

"Not only would cutting the corporate tax rate improve U.S. competitiveness, but it would also boost economic growth and benefit American workers," states the report. "A lower corporate tax rate would lower the cost of capital, which would boost the level of investment in the economy. The increased investment would raise the productivity and wages of American workers which, in turn, would lead to higher living standards."

The report finds that the benefits to the tax cut are substantial and the costs are minimal. "The benefits of a competitive corporate tax rate to the American economy and its workers are substantial, while the costs to the Treasury are at least 40 percent less than conventional scoring techniques would suggest," the report states. "It would appear that the benefits to workers and the economy greatly outweigh the cost to the Treasury."

Published under: Tax Reform , Taxes