US Chamber Asks Congress to Avoid Pushing Up Corporate Taxes From 21 Percent

Vice President Kamala Harris speaks during the last day of the Democratic National Convention in Chicago on Aug. 22, 2024. Madalina Vasiliu/The Epoch Times

The U.S. Chamber of Commerce asked Congress not to raise corporate taxes next year and to support “pro-growth tax policies” that ensure robust economic gains.

In 2017, then-President Donald Trump signed the Tax Cuts and Jobs Act, which reduced the corporate tax rate in the United States to 21 percent from 35 percent. This reduction “increased the aftertax return on capital investments in businesses, made the U.S. tax rates globally competitive, and boosted the amount of revenue accruing to workers through higher wages,” the Chamber of Commerce said in an Aug. 26 post. The legislation is scheduled to end next year. The chamber called on Congress to “preserve our now-competitive business tax rates.”

In addition, the organization suggested implementing policies such as allowing firms to deduct research and development expenses and enabling companies to immediately deduct the full cost of certain capital investments.

Vice President Kamala Harris, the Democratic presidential nominee, has proposed raising the corporate tax rate to 28 percent from 21 percent if she wins in November—the same proposal the Biden administration has put forward for the fiscal year 2025 budget.

Raising corporate taxes is the “fiscally responsible way to put money back in the pockets of working people and ensure billionaires and big corporations pay their fair share,” Harris’s campaign spokesperson, James Singer, said on Aug. 19.

“As president, Kamala Harris will focus on creating an opportunity economy for the middle class that advances their economic security, stability, and dignity,” he said.

The chamber warned that raising taxes on businesses would negatively affect the U.S. economy in three ways.

First, such hikes reduce the return on investment for business owners, potentially making them wary of spending funds on ventures. Second, higher taxes end up affecting not just the business and its investors but also workers and employees.

The organization cited a study to point out that 52 percent of higher corporate taxes are ultimately borne by customers in the form of higher prices, 28 percent by workers as lower wages, and 20 percent by shareholders through lower returns on investment.

Finally, higher taxes put U.S. businesses at an economic disadvantage compared with foreign companies.

“As a result, companies are incentivized to locate their headquarters and operations in lower-tax jurisdictions,“ the chamber stated. ”This scenario played out in practice throughout the years leading up to 2017, when the United States had the highest statutory corporate tax in the industrialized world, causing many formerly U.S.-headquartered multinationals to re-domicile abroad.”

The group asked Congress to ensure that the U.S. tax system remains internationally competitive for both U.S. companies operating abroad and foreign firms investing within the United States.

Reducing Taxes

Trump has raised the possibility of bringing the corporate tax rate down to 15 percent if he’s elected president.

While such a move would “boost growth,” it could also reduce federal tax revenues at a time when the country’s debts and deficits are “already unsustainably high,” according to a July post by the Tax Foundation think tank.

“A 15 percent corporate rate would be pro-growth, but it would not address the structural issues with today’s corporate tax base. Currently, businesses cannot fully recover their investment costs, as they must amortize R&D expenses over five (or 15) years, and bonus depreciation is beginning to phase out,” the post reads.

“These investment penalties will blunt any positive effects of a corporate rate reduction, repeating a mistake from past tax reforms.”

The Tax Foundation suggested that a lowering of the tax rate be paired with reforms broadening the tax base and removing penalties on investment.

The National Association of Manufacturers, which represents 14,000 businesses across the United States, says that it remains “staunchly opposed” to any tax increases that would punish manufacturing entities.

The 2017 reductions were “rocket fuel” for U.S. manufacturers, leading to “record job creation, capital investment and economic growth,” the association stated.

It pointed out that manufacturing production grew by 2.7 percent in 2018, a year after the lowered taxes, with December 2018 being the “best month for manufacturing output” since May 2008.

In 2018 and 2019, capital spending in the manufacturing sector grew by 4.5 percent and 5.7 percent, respectively, showing the positive effect that reduced taxes have had.

However, if the pro-manufacturing tax provisions were to end next year, “virtually every manufacturer will face devastating tax increases,” the association said.