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Economists Find Eliminating the Corporate Tax Would Raise Welfare

1 min readBy: William McBride

A group of economists, including Laurence Kotlikoff of Boston University, have simulated the economic and budgetary effects of eliminating the corporate taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. . Though their “life-cycle” model is significantly different from ours, their results are similar in that they find eliminating the corporate tax would lead to a big increase in investment, jobs, wages, and GDP:

We find that eliminating the U.S. corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. with no changes in the corporate tax rates of the other regions can produce rapid and dramatic increases in U.S. domestic investment, output, real wages, and national saving. These economic improvements expand the economy’s tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. over time, producing additional revenues that make up for a significant share of the loss in receipts from the corporate tax.

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