Trump-GOP Tax Law Closeup: Reverse Trump’s Costly Corporate-Tax-Rate Cut

June 26, 2024

Congress Should Reinstate The Top Corporate Tax Rate To 35% 

The 2017 Trump-GOP tax law slashed the corporate tax rate from 35% to 21%—the lowest top rate in eighty years and a lower marginal rate than a worker making $45,000 a year pays. This corporate-rate cut is by far the single most expensive part of the law, costing $1.3 trillion in lost revenue over 10 years. While most of the Trump tax law is scheduled to expire at the end of 2025, the corporate rate cut was made permanent. For every percentage point increase in the corporate tax rate, Congress can raise $130 billion. Congress should reinstate the corporate tax rate of 35% to help pay for extending expiring provisions of the law that benefit working families. 

Corporations Are Very Profitable And Didn’t Need A Tax Cut

Corporations were making record profits before their big tax cut in 2017, and have been making even more since. Meanwhile, they’ve been paying less and less in taxes as a share of total federal revenue and as a share of the economy. In the 1950’s, corporate tax revenue accounted for as much as a third of total federal revenue, but by 2023 that share had dropped to just 9%. As a share of the economy (GDP), corporate taxes have declined by as much as three-quarters, from a height of 4% in 1967 to as little as 1% under Donald Trump. 

The Corporate Rate Cut Is Not Trickling Down To Workers As Promised

After slashing the corporate rate by two-fifths, Republicans promised companies would boost wages and jobs. What actually happened was corporations went on a massive stock-buyback spending spree, gave their executives huge bonuses, and kept worker wages flat. The corporate income tax is one of the fairest ways of raising revenue because it overwhelmingly comes out of the pockets of shareholders and they’re overwhelmingly wealthy. A big portion of corporate tax cuts also goes to foreign investors, who own more than 40 percent of all U.S. stock. In the first three years of the Trump law, foreign investors got $134 billion in tax cuts.

Many Big Corporations Pay Much Less Than The Official Rate Already

In the first five years of the Trump tax law (2018 to 2022) at least 87 of the most profitable corporations earned cumulative profits of $950 billion and paid an effective tax rate below 10%—less than half the 21% statutory rate. Of those 87 corporations, 23 paid less than zero: they got tax refunds totalling nearly $4 billion. The Government Accountability Office discovered that large profitable corporations saw their average effective tax rate drop from 16% in 2014 to just 9% in 2018, with a quarter of them paying no taxes at all. The Joint Committee on Taxation found that U.S. multinational corporations paid an average effective tax rate of just 7.8% in 2018, a fall of more than half what it was in 2017. Raising the official rate would help increase the rate companies actually pay. 

Voters Are Demanding Corporations Pay More In Taxes 

Not only is raising taxes on corporations good policy, it is also wildly popular among voters. A recent poll conducted by Data for Progress found that 57% of likely voters agree that “taxes should be increased on large corporations” —including 61% of independents. Another poll conducted by Navigator Research found that 65% of voters support President Biden’s budget proposal for “increasing the corporate tax rate from 21% to 28%” —including 60% of independents and nearly half (47%) of Republicans.