Corporations paid $371.8 billion in federal income taxes in 2021, an all-time high and a 75% increase compared to 2020, according to budget results released by the Treasury Department on October 22, 2021.

Corporations also pay billions of dollars in state income taxes, payroll taxes, excise taxes, sales taxes and property taxes. Combined, these taxes support critical healthcare programs, infrastructure improvements and scientific research.

The surge in corporate revenues came even as America struggled with the Covid-19 pandemic and a crippling recession. Importantly, the record level of revenues was achieved with a lower corporate tax rate than prior to 2017. These unprecedented numbers demonstrate that the U.S. tax code is balancing the need to support vital federal programs with the need to maintain a competitive environment that allows American companies to win in global markets and create high-paying jobs at home. Raising corporate taxes would put this critically important balance at risk.

Corporate Rates Down, Corporate Tax Revenue Up

In 2017, Congress reduced the corporate income tax rate from 35% to 21%, while simultaneously expanding the amount of corporate income subject to tax. In 2017, before the lower corporate rate went into effect, corporate tax revenues were $297 billion, 25% lower than in 2021. Corporate taxes as a percentage of GDP increased during the same period, from 1.54% to 1.66%.

The 2017 tax reform bill has brought in more corporate tax revenue than expected. Shortly after it passed, the CBO estimated corporate tax revenues would hit $327 billion by 2021. Instead, they reached over $370 billion in 2021, 13% more than expected.

Despite these record-breaking revenues, policymakers are considering increasing the taxes American companies pay on income earned abroad, a move that would make U.S. businesses less competitive in global markets and that would slow our economic recovery and job growth at home.

Limiting Competitiveness

The U.S. is the only country in the world that collects a minimum tax on the income its companies earn from their foreign operations, a policy known as GILTI. While the Organisation for Economic Co-operation and Development recently endorsed a global minimum tax, it faces many obstacles to actual implementation.

U.S. multinationals employ 29.3 million Americans. Raising taxes on these companies now when they are already paying record taxes would leave them with less money to spend on hiring more people and to invest in new plants and equipment and research and development.

The proposed corporate tax increases would also make it harder for U.S. companies to compete and win in foreign markets — markets that serve 95% of the world’s population — and would result in fewer jobs at home. When American companies succeed against global competitors, their success increases demand for the goods and services their workers produce at home.

Researchers at Harvard Business School and the University of Michigan confirm the strong relationship between a U.S. company’s growth in foreign markets and its growth at home. When U.S. companies expand their operations outside the United States, they hire more people at home, pay higher wages to their U.S. workers, and invest more in property, plants and equipment in the United States.

With record tax revenues and underlying economic instability caused by the pandemic, now is not the time to increase corporate taxes.

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To learn more about the Alliance for Competitive Taxation, please visit www.actontaxreform.com.

The success of U.S. MNCs is driven by an American workforce, and the economic benefit is felt here at home.

• These companies conduct most of their activity in the U.S. and two-thirds of their global workforce are American workers.
• Fully 75% of the value added from their worldwide activities was produced in the United States in 2019.
• U.S. MNCs made $739 billion of their capital investments in the U.S., representing 78% of their worldwide capital expenditures.
• American companies with global operations also did $350 billion of research and development in the U.S., accounting for 86% of their worldwide R&D and more than 70% of all R&D by U.S. businesses.

The contributions of U.S. MNCs to U.S. jobs and the U.S. economy are substantially greater than suggested by these statistics since their many thousands of U.S. suppliers create millions of additional jobs across all industries and in businesses of all sizes.

As the Bureau of Economic Analysis noted last year, in 2018 — the first year following the 2017 tax act that modernized the U.S. corporate tax system to provide more competitive tax rules for American companies — employment, value added, and investment in plant and equipment of U.S. MNCs grew faster in the United States than abroad.

Data for 2018 and 2019 combined show these trends are continuing and that U.S. MNCs are expanding their domestic activities at a faster rate than their foreign activities: employment, capital expenditures, value added, and R&D all grew faster in these companies’ U.S. parent operations than in their foreign affiliates since enactment of the 2017 tax act.

When U.S. companies expand abroad, they create good jobs at home. For every 100 jobs a U.S. company adds abroad, research suggests the company will increase its U.S. jobs by 130 workers.

If Congress upends the 2017 international tax rules it will undercut American companies in the global marketplace and hurt their workers in the United States.

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To learn more about the Alliance for Competitive Taxation, please visit www.actontaxreform.com.

In multiple letters to congressional leadership, Democratic lawmakers from across the country have expressed concerns that the proposed tax increases on the foreign earnings of U.S. companies would make it harder for American businesses and American workers to compete globally.

The U.S. is the only country in the world that imposes a minimum tax on the foreign income of its own companies (“GILTI”). While there is an ongoing effort within the Organization for Economic Cooperation and Development (OECD) to encourage other countries to adopt foreign minimum taxes of their own, any adoption of a minimum tax by those countries is entirely voluntary. Further, even if other countries choose to adopt a foreign minimum tax consistent with an OECD framework that is still under development, it would take years before their minimum taxes were actually in effect.

Because the U.S. is the only country in the world with a foreign minimum tax, pending proposals before Congress to increase GILTI taxes would widen the disadvantage American companies face in competing with their foreign counterparts who are not subject to minimum taxes by their home countries. Further, the proposed legislation would increase taxes under GILTI by even more than the OECD’s guidelines for a foreign minimum tax, leaving American companies at a competitive disadvantage even if other countries eventually enact foreign minimum taxes of their own.

That’s why lawmakers have recently written to their leaders to express concerns over increasing GILTI taxes.

Representatives Tom O’Halleran (D-AZ), Henry Cuellar (D-TX), Lou Correa (D-CA) | October 2021

Representatives O’Halleran, Cuellar and Correa asked party leaders to “pause” their plans to raise taxes on the overseas earnings of U.S. companies. In a letter to House Speaker Nancy Pelosi, the lawmakers say they first want to see how other countries implement a new agreement to create a global minimum tax on multinationals, cautioning that proposed GILTI changes risk American competitiveness and could result in American job losses.

Representative Dean Phillips (D-MN) | October 2021

Representative Phillips wrote leadership with concerns on plans to increase GILTI taxes, noting that increases in the U.S. taxes Minnesota businesses pay on their foreign earnings would make it more difficult for them to compete globally.

Representatives Vicente Gonzalez (D-TX), Henry Cuellar (D-TX), Filemon Vela (D-TX) | September 2021

Three Texas Democrats wrote to leadership with concerns that a GILTI tax increase will inhibit U.S. competitiveness abroad and risk American jobs and competitiveness. They point out that the U.S. cannot afford to foster anticompetitive behavior or incentivize companies to harbor earnings overseas rather than here in the U.S.

Representatives Bradley Schneider (D-IL), Mikie Sherrill (D-NJ), Ron Kind (D-WI), Stephanie Murphy (D-FL), Haley Stevens (D-MI), Terri Sewell (D-AL), Lizzie Fletcher (D-TX), Thomas Suozzi (D-NY), Vicente Gonzalez (D-TX), Steven Horsford (D-NV), Angie Craig (D-MN) | August 2021

Eleven House Democrats wrote to leadership cautioning that GILTI tax increases risk America’s global competitiveness, stating “Enacting tax increases above and beyond the final implemented OECD agreement, or getting out too far ahead of our OECD partners, would risk U.S. international competitiveness.”

It’s clear that lawmakers have strong concerns with the impact that increasing GILTI taxes would have on American businesses and American workers. Congress should wait for our major trading partners to enact foreign minimum taxes of their own before considering increases in the GILTI minimum tax. Raising taxes on GILTI before other countries have enacted foreign minimum taxes of their own would put the U.S. even further out of step with our international competitors, harming U.S. businesses and American workers.

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To learn more about the Alliance for Competitive Taxation, please visit www.actontaxreform.com.

The Organization for Economic Co-Operation and Development (OECD) announced plans to establish a global foreign minimum tax in early October, with 136 countries of the Inclusive Framework (IF) signing a framework agreement. Under the OECD proposal, companies headquartered in a country enacting the foreign minimum tax would theoretically be required to pay at least a 15% tax rate on their foreign earnings. The OECD proposal is broadly similar to the foreign minimum tax enacted by the U.S. in 2017 (GILTI).
It would be welcome news for U.S. companies if their foreign competitors were required to pay taxes on their foreign income similar to the taxes U.S. companies pay under GILTI. But the OECD framework agreement does not mean that signatory countries will actually enact foreign minimum taxes. Consequently, U.S. companies will remain at a competitive disadvantage unless, and until, our major competitors enact foreign minimum taxes of their own.

The OECD’s framework says the adoption of a minimum tax is entirely voluntary on the part of each country. Further, the agreement sets no deadline for countries to decide whether or not they will enact a minimum tax. Implementing a worldwide foreign minimum tax will be a years-long process, requiring more than 100 countries to approve the tax through their independent legislative processes.

The absolute earliest that major OECD countries could implement a foreign minimum tax is at least several years from now, assuming they were willing to do so. And there are rumblings from a number of countries that they are not keen to quickly implement the framework. In addition, some countries may agree to implement a foreign minimum tax only if other parts of the OECD Framework agreement take effect — provisions that would allow their countries to tax U.S. companies even if the U.S. company had no physical presence in the country.

Despite the multi-year timeline before a foreign minimum tax is likely to be adopted by foreign countries who are major U.S. competitors — if they do so at all — Congress is now considering Build Back Better legislation that would significantly increase taxes under GILTI by even more than the OECD’s guidelines for a foreign minimum tax. The legislation would put U.S. companies at an even greater competitive disadvantage relative to their foreign-headquartered competitors than they are today, and U.S. companies would remain at a disadvantage even if other countries eventually enact a foreign minimum tax of their own.

If Congress raises GILTI taxes now, amidst this uncertainty and in a harsher manner than even proposed by the OECD, American companies will be put at a very significant disadvantage in global markets.

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To learn more about the Alliance for Competitive Taxation, please visit www.actontaxreform.com.

Notwithstanding the ongoing global pandemic, these results confirm that U.S. corporations are contributing to the federal government’s finances at robust levels. Implementing more competitive tax policies allows American companies and their workers to compete and win in global markets while, as these results show, generating substantial corporate tax revenues for the United States.

American workers benefit from a competitive corporate tax system — not increases in corporate taxes that would tilt the playing field against American companies in favor of their foreign competitors, which would slow the economic recovery, slow economic growth, and hurt American workers.

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To learn more about the Alliance for Competitive Taxation, visit www.actontaxreform.com.

According to the University of Pennsylvania’s Penn Wharton Budget Model, tax increases passed by the Ways and Means Committee on the income American companies earn abroad would harm their ability to compete with foreign-headquartered companies.

The Penn Wharton study found the bill’s changes to the U.S. minimum tax on foreign income (GILTI) would more than triple U.S. taxes on the foreign earnings of U.S. companies.

The United States is the only country in the world that imposes a foreign minimum tax on its own companies. The provisions in the Ways and Means Committee bill would tilt the playing field even further against U.S.-parented companies to the advantage of their foreign-based competitors.

“If the U.S. substantially adopts the House proposal, but OECD countries maintain status quo, U.S. multinationals would face a meaningful competitive disadvantage,” the study reads.

Even if other countries were to enact foreign minimum taxes along the lines outlined in a recent OECD political agreement — and it is far from certain when, if ever, they will do so — under the Ways and Means Committee bill American companies would still be subject to higher taxes on their foreign income than their foreign-based competitors. The U.S. tax would be levied on foreign income taxed at an effective rate of up to 17.4% under the Ways and Means bill, compared to 15% under the OECD proposal. Moreover, many important technical aspects of the OECD proposal also make it less harsh than the Ways and Means bill.

American companies can win as long as they compete on a level tax playing field. But if the provisions in the Ways and Means Committee bill are adopted, it will tilt the playing field even further against American companies and American workers, making it harder for them to succeed abroad.

Read the entire study here.

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Learn more about the Alliance for Competitive Taxation at their website here.

Three congressmen from Texas — Reps. Vicente Gonzalez, Filemon Vela and Henry Cuellar — sent a letter to Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer urging them to rethink proposed changes to the international tax framework on Friday September 24. The members of Congress focused on the minimum tax the U.S. collects on the foreign operations of its companies, known as GILTI.

They wrote, “We support taxation policies that require corporations to pay their fair share. However, we cannot afford to foster anticompetitive behavior … We believe increasing the GILTI tax would inhibit U.S. competitiveness abroad and risk American jobs and capital investments.”

The U.S. is already the only country in the world that imposes a tax on foreign income. Raising this minimum tax would put American companies and their workers at an even greater competitive disadvantage compared to their foreign competitors who are not subject to similar taxes.

The success of American companies in foreign markets contributes to jobs at home. Higher U.S. taxes on the foreign income of American companies would make it even more difficult for U.S. companies and their workers to compete and win in global markets.

Read the full letter here.

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Learn more about the Alliance for Competitive Taxation at www.actontaxreform.com.

Corporate taxes may appear to target corporations, but economists agree: people bear the cost of corporate tax increases. While corporate tax hikes would initially fall on American businesses — American workers, consumers and savers would end up paying the bill in several ways:

• Stagnant or lower incomes: Higher corporate taxes will reduce jobs and pay. It’s estimated that after-tax income would decline by an average of 1.7% if the proposed tax increases became law. Higher taxes on corporations mean fewer funds available for investments that boost productivity growth; less productivity growth in turn will suppress wages.
• Fewer jobs: Jobs will disappear because corporations will lack the funds for research and innovation. If U.S. companies are forced to pay higher taxes at home and abroad than their foreign competitors, jobs and wages of U.S. employers will contract as their foreign competitors gain market share and expand. The Tax Foundation estimates the current proposal to increase corporate taxes will cost the U.S. 303,000 full-time equivalent jobs.
• Higher prices: Higher corporate taxes can also be passed on to consumers in the form of higher prices on the goods and services they buy. Some estimates are that as much as 30% of corporate taxes are passed along to consumers through higher prices.
• Weaker stock performance and retirement savings: The income Americans rely on for their savings and retirement from their investment in corporate stock and mutual funds will be diminished by higher corporate taxes, reducing the savings and retirement funds of tens of millions of middle class Americans.

A recent study by the Joint Committee on Taxation revealed that families making less than $500,000 a year make up 98% of those hurt by corporate tax increases. Americans simply cannot afford the costs that will be shifted to them in the form of lower pay, reduced savings and higher prices if the current proposal to raise corporate taxes becomes law.

With the United States still emerging from the pandemic-induced economic slowdown, facing unknown risks of other variants affecting this country, and millions of unemployed Americans seeking work, this is not the time to increase taxes.

Make sure your voice is heard — call your representatives and tell them about the impact that unintended consequences of corporate tax increases have on people across the country.

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To learn more about the Alliance for Competitive Taxation, visit the website at www.actontaxreform.com/.

After more than a year of coronavirus-caused closures, the U.S. economy is showing signs of recovery and growth. As businesses re-open, Americans are beginning to travel, dine at restaurants and shop in stores once again.

Unfortunately, a full recovery and stable growth are far from a sure thing. The rapid spread of the Delta variant is creating further instability in the economy, unemployment and inflation remain high, and consumer confidence is down.

In the face of these uncertainties, Congress is considering imposing new and uncompetitive tax increases on American businesses. These tax increases would have damaging unintended consequences — limiting the funds companies could otherwise spend by increasing wages, hiring more people and investing in new plants and equipment to stimulate economic growth — and slow growth at exactly the time Americans need it most. The proposed increases would also make it harder for companies to compete and win projects in global markets — opportunities that result in more jobs here at home.

Underlying Economic Instability

An extraordinarily weak August employment report shows a stalling economy with more than eight million Americans out of work and actively seeking a job, and millions more having given up looking. Employment has declined by 5.3 million jobs between August and before the start of the pandemic in February 2020, when the unemployment rate was at a 50-year low of 3.5%.

At the same time employment has fallen, inflation is creeping up. The core personal consumption expenditures price index, a measure of inflation, rose 3.6% between July 2020 and July 2021. Rising prices hurt all Americans, especially those with lower incomes.

High prices, high unemployment and the continuing spread of the Delta variant resulted in a precipitous decline in consumer confidence in August. The index of consumer sentiment compiled by the University of Michigan was 70.3 in August’s final reading, compared to July’s 81.2. This is the lowest level of consumer confidence since 2011, reflecting Americans’ concerns about the economic recovery, higher inflation and the surge in the Delta variant.

A recent analysis from forecasting firm IHS Markit found reduced sales are leading to slower growth for U.S. factories and service providers.

“The expansion slowed sharply again in August as the spread of the Delta variant led to a weakening of demand growth, especially for consumer-facing services, and further frustrated firms’ efforts to meet existing sales,” Chris Williamson, IHS Markit’s chief business economist, told The Wall Street Journal.

Recovery, Not Risk

These signs of economic uncertainty show us precisely why this is a risky time to raise taxes on the companies that employ Americans and supply our goods.

According to the OECD, “Corporate income taxes are the most harmful for growth as they discourage the activities of firms that are most important for growth: investment in capital and productivity improvements.”

Higher tax bills will leave companies with less money to invest in hiring new employees, increasing wages or investing in new plants and equipment. For our country to strengthen its economy — and for Americans to get back to work — businesses need policies that encourage new jobs, higher wages and investment, not ones that will stifle growth and undercut our uncertain economic recovery.

A new analysis prepared by the nonpartisan staff of the Joint Committee on Taxation finds that more than 169 million American families earning less than $500,000 would end up paying for the Administration’s proposed increase in corporate taxes. These families would bear two-thirds of the cost of an increase in the corporate tax rate and represent more than 98% of the American households that are made worse off from the increase in corporate taxes.

Even though a corporation physically writes the check to the Internal Revenue Service when it pays its taxes, those costs are passed on to people, just like increases in rent and other costs are passed on.

All economists agree that people bear the cost of taxes.

The bottom line is that the true burden of the corporate income tax is paid by all Americans. That is because higher corporate income taxes result in workers being paid lower wages, savers earning less on their retirement accounts, and people paying higher prices for the goods and services produced by corporations.

Economists universally agree that a substantial share of the corporate income tax is ultimately paid by workers in the form of lower wages.

The Joint Committee on Taxation is a nonpartisan, technical staff that advises Congress on all tax issues.