Lessons From the 2017 Tax Law for the Future of U.S. Corporate Taxation – Kimberly Clausing/CBPP

“The corporate tax is also progressive. Both conventional scoring authorities and outside experts (e.g., the Joint Committee on Taxation, CBO, Treasury, and the nonpartisan Tax Policy Center) agree that the corporate tax is predominately paid by shareholders and the owners of capital income, who have disproportionately high incomes, whereas other types of taxes (such as payroll or income taxes on earned income) fall much more heavily on households that primarily receive wages or salaries and tend to have lower incomes.^[16] Early evidence from the TCJA confirms this pattern. While the law cut corporate taxes dramatically, people at the top of the income distribution realized the vast majority of the resulting gain. For example, Kennedy et al. found that 80 percent of the benefit of the TCJA’s corporate tax cuts accrued to people in the top 10 percent of the income distribution.^[17]

“Taken together, the evidence suggests that increasing the corporate rate will raise significant revenues and have little impact on overall investment, while the costs will be borne predominantly by shareholders of very large corporations (where corporate profits are concentrated) with incomes at the top end of the distribution. And by reducing rents, corporate taxes can help promote competition and limit rent-seeking behavior that makes the economy less efficient.^[18] Given the nation’s need for more revenues, raising the corporate rate is sound policy.”

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