Study: Kamala’s plan to raise corporate taxes costs more in gdp than it raises in revenue

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Studies have shown that the corporate income tax is the most harmful tax for economic growth, and recent analyses are now confirming the benefits of reducing the corporate income tax, finding that the TCJA’s corporate tax reforms significantly boosted domestic investment.

One key result from our modeling is that the “damage per dollar” of raising the corporate rate is just as significant for a small rate increase as it is for a large rate increase. The nearby chart illustrates how for every billion of revenue raised, a higher corporate rate reduces economic output by roughly the same amount. While the percentages in the chart might look small, they add up to the total economic effects shown in the first chart, and they apply to the total size of the US economy—currently measuring at $28.6 trillion.

A higher corporate tax rate would raise revenue; however, any revenue would come at a high price of lost economic output, investment, and wage growth. For example, under a 28 percent corporate rate, we estimate that by 2034, for every $1 of higher revenue on a conventional basis, GDP would fall by $1.84. In the long run, when the economic effect of that higher rate fully phases in, we estimate an even steeper drop in GDP of $2.19 for every dollar raised.

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