Lower the Corporate Income Tax Rate to 15 Percent

The Tax Cuts and Jobs Act of 2017 lowered the corporate tax rate from 35 percent to 21 percent. Prior to that change, the US had one of the highest statutory corporate tax rates in the world. Now, the US rate is slightly above average among OECD countries. The statutory corporate tax rate affects profit-shifting behavior as well as incentives to invest in the US.

This option lowers the corporate tax rate to 15 percent. A lower corporate tax rate would increase returns on both past and future investment activity. Lowering the cost of capital would increase incentives to invest in the US. In turn, the capital stock would expand, increasing demand for labor, which boosts wages and hours worked.

On a conventional basis, this option would increase the primary deficit by $1,104.6 billion over the budget window. Long-run GDP would rise by 0.4 percent, and long-run GNP by 0.3 percent. On a dynamic basis, the primary deficit would increase by $744.7 billion from 2027 through 2036, $359.9 billion less than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be higher than baseline, reaching 181.1 percent by 2056.

On average, in 2036, taxpayers would see increases in their after-tax incomes of 0.5 percent. The top quintile of taxpayers would experience a 0.6 percent increase, while the bottom quintile would experience a 0.4 percent increase. On a long-run dynamic basis, taxpayers would see a 0.8 percent increase on average.