Lower the Corporate Tax Rate As Much As We Can, While We Can

The recently concluded tax reform conference report draft includes a one-percentage-point increase in the corporate tax rate above what both the House and the Senate passed, with some of the revenue savings being used to keep a portion of the deduction for state and local taxes as well as forego delaying its implementation until 2019, as the previous bills proposed. There remains a chance the rate may tick up yet again before negotiations are concluded, especially if other targeted tax breaks get some traction in the Congress over the next few days.However, even this small diminution in the rate reduction is a mistake: while a one point increase may seem to be a trifle, each uptick in the corporate tax rate represents a large opportunity cost that Congress won ’t be able to easily rectify in the future. My former colleague Gordon Gray and I examined the tax code that emerged from the 1986 tax reform, as well as the various changes Congress made to the code in the subsequent thirty years, in a study published inTax Notes,  to see if we could discern some broad patterns regarding what sorts of changes proved ephemeral and which ended up being permanent.As to the former, the list stretches a mile wide: Congress has changed the top personal tax rates four times since 1986 and seems poised to change it again. It has also tinkered with tax rates on dividends and capital gains numerous times. It has also inserted a litany of tax credits, subsidies and the like over that period as...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs