Tax Expert Touts 20% Corporate Tax Rate, Says Even 1% Higher Will Make U.S. Less Competitive

State and local taxes make a 20 percent corporate tax rate increase to nearly 25 percent

NTU President Pete Sepp / Youtube
December 12, 2017

Pete Sepp, president of the National Taxpayers Union, is arguing for a 20 percent corporate tax rate, saying that going any higher, even by one or two percent, will make the United States less competitive.

The National Taxpayers Union along with Americans For Prosperity, Americans for Tax Reform, Club for Growth, and Freedom Partners, joined 26 organizations to urge Congress to keep the corporate tax rate at 20 percent.

Speaking on a conference call today, Sepp explained that state and local taxes make the corporate tax rate even higher, so a 20 percent rate is essentially a 25 percent rate.

"Even if we are reducing this rate to 20 percent there is still effective state and local corporate tax rates to consider," he said. "Our combined tax rate even with a 20 percent federal rate will still approach close to 25 percent when you factor in the state and local issue."

"When you do that you then come to realize that at the end of the day a 20 percent corporate tax rate makes us just barely competitive with the average OECD rate, which is a little under 24 percent," he said.

Grover Norquist, president of Americans For Tax Reform, echoed this statement and said a corporate rate of 20 percent was already a compromise.

"Twenty was a compromise, we wanted to be at 15," Norquist said. "As Pete Sepp points out if we really want to be competitive we need to be at 15 because a lot of state and local governments have income taxes. Fifteen is 20 and 20 is 25."

Norquist argued against the argument that moving down the rate to 21 or 22 from 35 is progress.

"Twenty is a number you can stand behind," he said. "Twenty-one, 22—those are positions on the way back to 25."

Pete Sepp also says that a 20 percent rate is a unifying factor for wage growth since it helps both families and businesses.

"If we want to see wage growth to help America's families, a rate reduction on employers has to be part of the picture," Sepp said. "Even the congressional budget office, which is a known skeptic of the effects of tax reform, has acknowledged that at least one dollar out of every four in corporate rate reduction is passed through to wage earners. Other economists, more in the mainstream, put that at 50 percent or higher in terms of the amount passed through to wage earners."

"Reduce rates, broaden the base," Sepp said. "When you broaden the base, you also simplify the system. Again, the reduction of the corporate tax rate to 20 percent is vitally important for all of these reasons."

"To them, they see the House passed 20 percent, the Senate passed 20 percent, they see that Trump is demanding 20 percent, so they should be frustrated and cynical as to why there is this discussion," said Andy Roth, vice president at Club for Growth. "The sad fact is that politicians are trying to save their little carveout or their little exemption that they want to keep in that unfortunately costs money in Washington that would otherwise go to pro growth tax cuts like the corporate tax cut."

Published under: Tax Reform