Corporate Income Taxation

No area of tax policy has changed more over the past four decades than corporate income taxation. Since 1980, corporate tax rates have fallen as countries have vied for business investment in an increasingly global economy. More recently, however, lower corporate tax rates have triggered concerns about a “race to the bottom” and, in turn, sparked a multinational effort to create a global minimum tax.

Between 1980 and 2017, the United States fell behind in the race to reduce corporate tax rates and even briefly levied the highest corporate tax rate in the industrialized world. The 2017 Tax Cuts and Jobs Act (TCJA) brought the corporate tax rate down and restored U.S. competitiveness, but the 2022 Inflation Reduction Act (IRA) clawed back some of the benefits by creating two new and untested corporate tax provisions.

As countries continue to work to establish a global minimum tax, economists have demonstrated that the corporate tax is the most harmful tax for economic growth, with much of its burden falling on workers in the form of lower wages.

This is from Scott Hodge, “Corporate Income Taxation,” in David R. Henderson, ed., The Concise Encyclopedia of Economics.

One of the articles in the Encyclopedia most in need of updating was the one on corporate income taxation. So much has changed since the print version of the Encyclopedia was put to bed in 2006. I saw Scott speak at a Stanford Institute for Economic Policy Research (SIEPR) event last October. I was impressed. I thought he would be a good person to write the new version. I was right.