The Lowered Corporate Income Tax Rate Makes the U.S. More Competitive Abroad

One of the most significant provisions in the Tax Cuts and Jobs Act (TCJA) was the reduction of the U.S. corporate income tax rate from 35 percent to 21 percent. Lowering the corporate rate was a pro-growth policy, and its importance is especially apparent from an international perspective. Previously, America’s combined statutory corporate income tax rate, combining state and federal corporate income taxes, was 38.9 percent. This rate was the highest among all Organisation for Economic Co-operation and Development (OECD) countries and had long been well above the OECD average. As the following figure illustrates, while the top corporate income tax rate in the U.S. was virtually constant for decades, other OECD countries repeatedly cut their top corporate rates, making their economies more competitive and more attractive to investment. As a result of the TCJA, however, the U.S. now has a combined corporate income tax rate more in line with that of other OECD countries. …

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