Tax Foundation analysis examines impact of corporate tax rate increase

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According to the Tax Foundation, the proposed corporate tax increase included in the Build Back Better Act, which was advanced by the U.S. House Ways and Means Committee this week, is higher than it may seem.

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In a recent blog post, authors Alex Muresianu and Eric York pointed out while the reconciliation bill would increase the top federal corporate tax rate from 21 percent to 26.5 percent, most companies would face a higher tax rate than 26.5 percent. This is because most states also levy a corporate income tax.

Including the average state corporate tax rate, they wrote, the U.S. would have an average corporate tax rate of 30.9 percent. This would be the third-highest corporate tax rate in the Organisation for Economic Co-operation and Development (OECD), behind only Colombia and Portugal.

“Under current law, the U.S. is right in line with OECD peer countries, and actually near the middle of the pack as far as corporate taxation goes. Returning to near the top of the OECD in corporate tax rates would be costly for a few reasons: it would disincentivize investment and encourage firms to shift profits and locate elsewhere, resulting in fewer job opportunities for Americans and less tax revenue for the U.S. government,” Muresianu and York wrote.

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