Everyone knows if tax rates are lowered government collects less in taxes… that is the conventional wisdom. It certainly was much of the rhetoric in opposition to lowering corporate income taxes (CIT), but since the tax rate was lowered what has been the outcome?
While CIT rates have decreased significantly across the covered 88 jurisdictions since 2000, average corporate tax revenues — both as a percentage of total tax and as a percentage of GDP — have increased slightly, according to data from The Organization for Economic Co-operation and Development (OECD).
OECD reports data on the tax burden on labor across 35 developed countries, including the United States. Research by the OECD has found that corporate taxes are the most harmful form of taxation for economic growth.
In 2016, on average across the 88 jurisdictions covered in the database, CIT revenue as a percentage of total tax revenue was 13.3 percent, and CIT revenue as a percentage of GDP was 3.0 percent. Between 2000 and 2016, there was a slight increase in both CIT revenue as a share of total tax revenue (1.3 percent) and as a share of GDP (0.3 percent), reports the Tax Foundation.
Declines in statutory CIT rates have been seen in every region of the world. While the average statutory CIT rate for the jurisdictions in the OECD dataset was 28.6 percent in 2000, this decreased to 21.4 percent in 2018.
Between 2017 and 2018, the jurisdiction with the largest reduction in the combined statutory CIT rate was the United States with a decrease of 13 percentage points. The combined statutory CIT is now 26 percent in the United States.