If the Senate needs another reason not to raise the corporate tax rate, the monthly Treasury budget statement provides it. The latest numbers show that corporate tax receipts in the first two months of the fiscal year were 158% higher than a year ago.
Corporate tax revenue has surged over the past year, increasing to a level higher than before the 2017 tax cuts. In fiscal 2021, corporate tax receipts increased 75% to $372 billion, the largest amount ever collected. This record-breaking amount was collected at the 21% rate, showing that growth-stifling higher tax rates do not necessarily result in higher tax revenue.
A new analysis by the Tax Foundation shows that total business tax collections, accounting for both corporate taxes and U.S. pass-through businesses, will reach 3% of GDP, exceeding the 42-year average of 2.5% going back to 1980.
The decision to drop a corporate rate hike from the House "Build Back Better" bill was the right decision, and Sen. Kyrsten Sinema deserves praise for her opposition to a higher rate. A corporate rate increase now would hurt employers and employees struggling with rising inflation, supply chain shortages, and fierce global competition. It would also be nonsensical to raise the corporate rate when so many of our competitors are reducing theirs.
Since the 2017 tax cut, nine of the world's most advanced countries, our toughest competitors, have reduced their corporate rates. Europe's average corporate rate is now 19.99%, lower than the U.S. combined average federal-state rate of 25.8%.
Canada, France, and the United Kingdom all have lower corporate rates. Even the Nordic countries (Norway, Sweden, Denmark, and Finland) have lower rates (21%, on average) than we do. China, the world's second-largest economy, has a stated rate of 25%, but selected industries competing with the United States often pay only 10% to 15%.
Any increase in the U.S. corporate rate would put us even further behind our global competitors. The House made the right move to drop the corporate rate hike from the bill. The Senate should oppose any effort to increase it.
It's key to keeping U.S. companies globally competitive.
Bruce Thompson was a U.S. Senate aide, assistant secretary of treasury for legislative affairs, and the director of government relations for Merrill Lynch for 22 years.