Lowering Corporate Tax Rate Likely Won't Help The Economy: Study

06/05/2013 01:02 pm ET | Updated Jun 05, 2013
AP

Apple and Google are among the many corporations to have argued that America's high corporate tax rates discourage companies from bringing offshore profits -- and hence jobs -- back home to the United States. Yet after considering several decades of historical data on the U.S. corporate tax rate and economic growth, a new policy brief contends that there is no statistical relationship between the two factors.

The brief, by the Economic Policy Institute, a left-leaning think tank, finds that lowering the U.S. corporate income tax rate would not increase the country's economic growth. Indeed, EPI goes as far as to say there is no evidence to support that the tax rate and economic growth are correlated at all.

The country's top marginal corporate tax rate of 35 percent is among the highest in the industrialized world, and many large corporations and lawmakers contend that the high rate curbs growth and encourages companies to exploit tax loopholes.

Yet the effective corporate income tax rate in the U.S., a measure of the taxes a company pays as a percentage of its profit, averaged 27.7 percent from 2006 to 2009. That's very close to the average rate of countries in the Organization For Economic Cooperation during the same period -- 27.2 percent once weighted by GDP -- according to the EPI.

The top 10 most profitable companies in the U.S, including Apple and Exxon Mobil, paid an average tax rate of just 9 percent last year, according to study by website NerdWallet.

Other companies, such as Boeing, CVS Caremark and FedEx, are currently lobbying Washington to lower the corporate tax rate, arguing that the broader economy would benefit as a result. Former American Express CEO Harvey Golub recently went even farther, saying large corporations like Apple should pay no taxes at all.

Meanwhile, corporate profitability is at an all-time high, according to EPI. Before-tax profits rose to 13.6 percent of national income in 2012.

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