The cornerstone of the Republican-passed Tax Cuts and Jobs Act is the 21 percent corporate rate.
Prior to passage of the TCJA, the U.S. had the highest rate in the developed world at 35 percent. Now, the U.S. has a rate that is competitive with other countries.
In addition to making the U.S. more competitive in the global economy, the 21 percent rate has benefited the economy, workers and consumers. The reduced corporate rate has increased employee wages and benefits and made America a more competitive place to do business.
Unfortunately, Democrats are taking aim at the tax bill in an effort to raise the corporate rate.
House Budget Chairman John Yarmuth (D-Ky.) has proposed increasing the rate to 28 percent, an effective corporate rate of 34 percent after factoring in state taxes, which average approximately 6 percent.
More recently, House Majority Whip Jim Clyburn (D-SC) has introduced legislation that would raise the corporate rate in order to restore non-profit deductibility of fringe transportation benefits.
While the bill proposes a modest rate hike to 21.03 percent, it would undermine the success of the GOP tax cuts and open the door to additional corporate rate hikes to pay for leftist spending priorities.
Following the GOP tax cuts, the U.S. was named the most competitive economy in the world. By several metrics, the tax cuts have worked: wages grew by 3.2 percent in 2018, unemployment recently hit a 50 year low, labor force participation is improving, and business investment is up by almost 10 percent.
In addition to broad macroeconomic effects, the corporate rate reduction has benefited everyday Americans in the form of pay raises, new employee benefits and lower utility bills.
Companies have created new employee benefit programs. For example:
- Walmart and Lowes now provide $5,000 to help cover the cost of adopting a child.
- Express Scripts in Missouri has created a $30 million education fund for their employees’ children.
- Boeing provided $100 million in workforce development programs
- McDonald’s employees who work just 15 hours a week, receive $1,500 worth of tuition assistance every year per year.
Companies have reduced utility bills for Americans across the country. Utility companies in all 50 states are passing on the tax savings in the form of lower rates for customers. This means lower electric bills, lower gas bills, and lower water bills for Americans than if the corporate rate cut had not occurred. For example:
- Arizona Public Service reduced rates by $119 million for its 2.7 million customers.
- Entergy Louisiana returned $105 million in savings to consumers.
- Kansas City Power and Light returned $100 million in annual savings to customers.
- Massachusetts-based Unitil gave $1.6 million in rebates to customers.
Companies have provided increased wages and bonuses to their employees. For example:
- Wells Fargo raised base wages from $13.50 to $15.00 per hour.
- AT&T provided $1,000 bonuses to 200,000 employees.
- Cigna raised base wages to $16 per hour.
- Apple provided $2,500 employee bonuses in the form of restricted stock.
While Rep. Clyburn’s corporate tax hike proposal is relatively minor, it undermines the success of the GOP tax cuts and opens the door to further Democrat tax hike proposals that would threaten economic growth and worker benefits that GOP tax reform helped to flourish.