Congress is embarked on an historic effort to modernize the taxation of corporate income, enhancing the growth and competitiveness of the U.S. economy. A central plank of that effort has been to lower the corporate tax rate to 20 percent. Indeed, 20 percent was advertised as a non-negotiable “line in the sand.” Yet, with just days left this year to reach a conference agreement on tax reform, some have suggested increasing the 20 percent corporate rate embedded in both the House and Senate bills to 22 percent. This is a bad idea that should be rejected.
Congress needs to enact a tax system that will make the United States an attractive location for investment and headquarters of companies both now and in the future. Improved incentives to innovate and invest in the United States are the foundation of much needed improvements in productivity and real wage growth. Those corporate investments are, however, by their very nature long-term activities that must incorporate tax rates into long-term planning.