US Chamber of Commerce- How Higher Corporate Taxes Would Affect Your Local Economy

A competitive corporate tax rate is crucial for fostering economic growth and attracting investment. When businesses face lower tax burdens, they have more capital to invest in operations, innovation, and expansion, leading to job creation and increased productivity.
Higher tax rates have the opposite effect on business growth and innovation. As such, proposals to raise the corporate tax rate not only jeopardize America’s global economic competitiveness but also deal a blow to American workers and families in the form of lower wages and higher prices.
Restoring America’s Economic Competitiveness  
In December 2017, Congress passed the landmark Tax Cuts and Jobs Act (TCJA), the most comprehensive tax reform legislation enacted since 1986. The TCJA reduced and simplified the federal tax burden on American families and workers, and it substantially modernized America’s approach to taxing business income.  
Before the law’s enactment, the United States had earned the dubious distinction of being home to the highest statutory corporate tax rate in the industrialized world, which harmed our economy and pushed investment and jobs overseas. 
To help restore the global competitiveness of American companies and attract foreign investment to the United States, the TCJA permanently lowered the corporate tax rate by 14 percentage points, from 35% to 21%. In conjunction with the TCJA’s other pro-growth reforms, reducing the corporate income tax significantly boosted domestic investment, studies now confirm, while increasing economic growth and workers’ wages. 
Understanding the Economic Impacts of Higher Corporate Taxes 
 Even with the TCJA’s historic reforms, however, U.S. corporations remain subject to an average combined federal-state statutory tax rate of 25.77%—higher than the current Organization for Economic Co-operation and Development (OECD) average rate of 23.73%.  
It is, therefore, critical for policymakers to understand that any proposal to raise the current corporate tax rate would put U.S.-based companies at a disadvantage relative to their foreign-based competitors and increase the relative cost of business investment in America. But the harm wouldn’t stop there. Studies have shown that raising the corporate income tax would not only reduce economic output and wage growth but also increase consumer prices.   
It is for these reasons that public- and private-sector economists alike have consistently characterized raising the corporate income tax as one of the most detrimental and inefficient ways to fund government priorities. 
GROWING AMERICA'S FUTURE: See all our work on why competitive, pro-growth tax policy is essential
Breaking Down the Local Impacts on Workers and Families
Recently some policymakers have expressed support for raising the corporate income tax to offset the cost of other priorities, with some proposing to raise the corporate rate from 21% to 28%. The damage this change would do to America’s global competitiveness is clear: with an average combined federal–state corporate tax rate of 32.5%, the United States would become the second highest-taxed country in the OECD (second only to Colombia). But what would this change mean for local businesses, workers, and their families?
Raising the corporate tax rate from 21% to 28% would increase federal tax revenue by an estimated $910 billion over the next decade. But where would that $910 billion come from? Businesses have only three options to pay for higher taxes: raise prices; reduce costs; or lower returns to investors. In reality, they do all three. Recent economic research shows that just over half the cost of higher corporate taxes is borne by consumers in the form of higher prices, with another 28% borne by workers in the form of lower wages and the remaining 20% borne by shareholders (which includes retirement accounts) in the form of lower returns.

Follow this link to see how Indiana would be affected: ​How Higher Corporate Taxes Would Affect Your Local Economy | U.S. Chamber of Commerce (uschamber.com)