Senate Democrats are once again working on a tax increase bill. Senate Majority Leader Chuck Schumer is leading the way, making the absurd claim that the “only way to get rid of” the inflation he helped create is to raise tax rates.
Schumer and many others in Washington are still operating under the false notion that corporate taxes are at record low levels due to the 2017 GOP tax reforms. Treasury officials, who should know better, talk constantly about the shortfall in corporate revenues, and the media regularly report that taxes on corporations are historically low.
None of this is correct.
Corporate tax revenues did drop in the first two years after the tax cut and during the pandemic recession. But corporate tax receipts have now rebounded to record-high levels at the 21% rate. Actual corporate tax receipts increased by 75% in fiscal year 2021 to an all-time high of $372 billion, 25% higher than the amount collected in 2017 before the tax cuts. Based on Treasury estimates, corporate tax revenues are on track to reach $454 billion this fiscal year, a 22% increase over last year’s record level.
Corporate tax receipts are surging because the 2017 tax reforms worked. The lower rate and broadened tax base increased U.S. investment, encouraged the repatriation of overseas earnings, and made our companies more competitive. This has raised wages, lowered prices, and created millions of jobs.
Following Schumer’s lead and raising the corporate tax rate would once again put U.S. companies at a competitive disadvantage with China and other competitors. It is a bad idea, and Congress should reject it.
Bruce Thompson was a U.S. Senate aide, the assistant secretary of the Treasury for legislative affairs, and the director of government relations for Merrill Lynch for 22 years.
