Guest views are now limited to 12 pages. If you get an "Error" message, just sign in! If you need to create an account, click here.

Jump to content

Trump adds $4.1 trillion to national debt.


Recommended Posts

Once President Trump signs the budget deal that was passed by the House on Thursday and is expected to be approved by the Senate in a few days, he will have added $4.1 trillion to the national debt, according to the Committee for a Responsible Federal Budget. The total national debt surpassed $22 trillion in February.

This will mark the third time that a major piece of deficit-financed legislation will get Trump’s stamp of approval. Legislation Trump has so far signed since 2017 has added $2.4 trillion to the national debt through 2029, according to CRFB, a nonpartisan public policy group.

Many investors are worried about the ballooning national debt, with 54% naming the political environment and 47% viewing national debt as their top concerns, according to a UBS second-quarter investor sentiment survey. Tax and spending policy are the main reasons for the national debt expansion from 2017 to 2029, according to CRFB.

The biggest contributor to the $4.1 trillion that will be added to the national debt through 2029 is the Tax Cuts and Jobs Act. This signature tax cut legislation signed by Trump in 2017 single-handedly increased the debt by $1.8 trillion, according to CRFB.

Graphic by David Foster/Yahoo Finance
 
President Trump is adding $4 trillion to the national debt
More

“If you were to extend all the expiring provisions from the Tax Cuts and Jobs Act, it would be about a trillion more on top of that, so it’s hugely expensive,” says CRFB’s senior vice president Marc Goldwein. “Some of this is done on a partisan basis, some of this is done on a bipartisan basis. But it’s all part of a culture of no longer worrying about how we’re going to pay for things and just assuming that future generations are going to cover the bill.”

The budget deal that was passed last year added $445 billion to the national debt. And when he signs the 2019 Bipartisan Budget Act after it goes to the Senate next week, Trump will make spending increases in the legislation permanent, growing the national debt by $1.7 trillion through 2029.

The remaining $155 billion of debt added during Trump’s first term comes from other legislation, including disaster relief, emergency spending bills, and delays in three Affordable Care Act taxes, according to CRFB.

Impact to GDP

U.S. GDP growth fell to 2.1% in the second quarter. CRFB estimates that the new budget deal will bring debt to 97% of GDP in 2029 once that $4.1 trillion figure is added to the existing $16.2 trillion in debt and $9.8 trillion projected to be borrowed over the next 10 years.

“We are the most powerful economy in the world and we’re the world’s reserve currency and we borrow at our own currency. And for those three reasons we’re not going to default on our debt, but that doesn’t mean that we can borrow without consequences,” says Goldwein.

The ballooning national debt will cause GDP growth to slow down further, he says. “The more we borrow, the more we have to count on capital from abroad, or else no capital at all to fund our investments and the slower growth is going to be over time. We’re already headed towards 2% growth on the current basis, and the higher our debt is, the lower that will be.”

https://finance.yahoo.com/news/trump-adds-41-trillion-to-national-debt-heres-where-the-money-went-162238723.html

 

 

I know they all raise the debt, and obviously Trump is no different. The number that got me was "debt to 97% of GDP" Is there anyone who doesn't understand what that is saying? I'm just curious, because it seems no one, not even Trump wants to address the white elephant in the room.... Sorry folks, but based on simple economics, Trump is as bad as anyone, unless you are a multi-national corporation. Why do people think corporations shouldn't pay taxes? Our brilliant founding fathers never intended for individuals to pay taxes, but now Americans have been conned to think business should get the benefit... Until the debt is paid, there can be no tax cuts and spending has to be reduced. There is no other way.

 

B/A

  • Thanks 2
  • Upvote 1
  • Downvote 3
Link to post
Share on other sites
49 minutes ago, bostonangler said:

Why do people think corporations shouldn't pay taxes?

 

Why do you you feel it is necessary to tax the corporation and then turn around and tax the shareholder(Owner)?  Which are both one and the same.  That sounds like double taxation on the same income to me.  Why is that fair?

  • Thanks 1
  • Upvote 4
Link to post
Share on other sites

The U.S. Treasury said Monday it expects to borrow $443 billion in the third quarter, more than double the prior estimate of $160 billion. The revised forecast includes an end-of-quarter cash balance of $350 billion. The department said the higher borrowing estimate "is primarily driven by changes in cash balance assumptions," related to the budget deal reached last week between President Donald Trump and House Democrats. The two sides agreed on a bill that would increase spending and also raise the federal debt ceiling for the next two years. Looking ahead to the fourth quarter, Treasury said it expects to borrow $381 billion in net marketable debt with a cash balance of $410 billion. During the second quarter, Treasury borrowed $40 billion in net marketable debt and ended with a cash balance of $264 billion. This was slightly higher than the Treasury's estimate of borrowing of $30 billion and a cash balance of $270 billion. Additional financing details related to the Treasury's quarterly refunding will be released at 8:30 a.m. on Wednesday.

https://www.marketwatch.com/story/us-treasury-expects-to-borrow-443-billion-in-third-quarter-up-from-prior-estimate-of-160-billion-2019-07-29?siteid=yhoof2&yptr=yahoo

 

 

 

 

 

Bend over America....

B/A

  • Thanks 2
  • Downvote 3
Link to post
Share on other sites
3 hours ago, ladyGrace'sDaddy said:

America NEVER got up from what you're Savior Obama did to us.

 

Well actually it started with Clinton and crashed and burned under "W". Obama did what the Federal Reserve told him to do, print money. The debt of America is a result of bad government and the private bankers who actually own the money... But one day there will be a leader who says enough is enough and end the spending and increase revenue... We just haven't found that person yet...

 

B/A

  • Thanks 1
  • Upvote 1
Link to post
Share on other sites
3 hours ago, ladyGrace'sDaddy said:

America NEVER got up from what you're Savior Obama did to us.

 

 

Donald Trump: As projected in Table S-10 in the FY 2020 budget, Trump plans to add $5.088 trillion to the debt in his first term. That's a 30 percent increase from the $20.245 trillion debt at the end of Obama's last budget for FY 2017. If he remains in office for a second term, he plans to add $9.1 trillion. Trump had promised to eliminate the debt during his campaign.

 

oh yeah and “Mexico is going to pay for the wall”

  • Like 1
  • Thanks 2
  • Downvote 3
Link to post
Share on other sites
On ‎7‎/‎28‎/‎2019 at 9:55 AM, Markinsa said:

 

Why do you you feel it is necessary to tax the corporation and then turn around and tax the shareholder(Owner)?  Which are both one and the same.  That sounds like double taxation on the same income to me.  Why is that fair?

 

Do you realize when America was booming and one income families were the norm and mom could stay home with the kids, corporations paid over 50% taxes. The burden was shifted to you and me because politicians are easy to buy out... Here is a very interesting article on how the tax burden shifted. I know this will be very boring for most, and that is why "we the people" always lose. Most people don't understand economics or they just don't care. People only hear sound bytes and think in :30 second messages. We are victims of our own empathy.

 

 

 

Corporate tax rates and economic growth since 1947

The never-ending fiscal and budget policy debates inside the Beltway have moved on to “tax reform.” Much of this tax reform concerns the corporate income tax, and the conventional wisdom in this debate is that the goal of reform should be revenue-neutral changes that broaden the base and lower the tax rate.

Given widespread concerns about federal budget deficits, it seems odd to call for tax changes that lower rates. The putative impetus for these calls is the belief that the statutory corporate income tax rate is too high—placing an excessive burden on U.S. corporations that leads to poor economic performance.

This brief examines corporate income-tax rates, and the argument linking low corporate tax rates with higher economic growth. The principal findings are:

  • Claims that the United States’ corporate tax rate is uniquely burdensome to U.S. business when compared with the corporate tax rates of its industrial peers are incorrect. While the United States has one of the highest statutory corporate income-tax rates among advanced countries, the effective corporate income-tax rate (27.7 percent) is quite close to the average of rich countries (27.2 percent, weighted by GDP).
  • The U.S. corporate income-tax rate is also not high by historic standards. The statutory corporate tax rate has gradually been reduced from over 50 percent in the 1950s to its current 35 percent.
  • The current U.S. corporate tax rate does not appear to be impeding corporate profits. Both before-tax and after-tax corporate profits as a percentage of national income are at post–World War II highs; they were 13.6 percent and 11.4 percent, respectively, in 2012.
  • Lowering the corporate income-tax rate would not spur economic growth. The analysis finds no evidence that high corporate tax rates have a negative impact on economic growth (i.e., it finds no evidence that changes in either the statutory corporate tax rate or the effective marginal tax rate on capital income are correlated with economic growth).

Why we need a corporate income tax

Corporate tax reform has been discussed with varying degrees of intensity since the advent of the corporate income tax in 1909. Over the past few years, there has been heated debate over the statutory corporate income-tax rate, which has stood at 35 percent since 1993. Many people point out that the statutory corporate tax rate is one of the highest in the industrialized world.1 Some, such as President Obama, advocate revenue-neutral corporate tax reform with a reduction in the statutory corporate tax rate and elimination or modification of corporate tax expenditures. Others argue for simple rate reduction (and corporate tax revenue reduction) or even outright elimination of the corporate income tax.

While the U.S. statutory corporate income-tax rate is generally higher than the tax rate in other advanced countries (those in the Organization for Economic Cooperation and Development), the effective tax rate is about the same as in other OECD countries (Gravelle 2012). For example, PricewaterhouseCoopers (2011) estimated that the U.S. effective corporate tax rate, averaged over 2006 to 2009, was 27.7 percent, while the average effective tax rate for 21 OECD countries was 23.5 percent.2 This OECD average, however, gives equal weight to the tax rates of all countries, large and small. If the tax rates are weighted by GDP, the average effective tax rate was 27.2 percent over the 2006–2009 period.

The corporate income tax serves three important functions. First, it raises a significant amount of revenue for the federal government—$242.3 billion in fiscal 2012, or almost 10 percent of total federal revenues. However, the corporate income tax is less important now than in the 1950s, when it accounted for about 30 percent of total revenues.

Second, the corporate income tax contributes to the overall progressivity of the tax system to the extent that the corporate tax burden falls on capital. While some recent research has estimated that most or all (in some cases over 100 percent) of the corporate tax burden falls on labor (e.g., Hassett and Mathur 2010), other evidence suggests that these findings are not robust to alternative specifications and do not address many of the theoretical issues associated with the burden of the corporate income tax (e.g., Gravelle and Hungerford 2008; Clausing 2011–2012; Clausing 2013). Many tax policy analysts and government agencies distribute the majority of corporate tax burden to capital (between 75 percent and 82 percent).3 Consequently, it is safe to say that the corporate income tax contributes to the progressivity of the overall tax system.

Third, the corporate income tax serves as a backstop to the individual income tax because it precludes using the corporation as a tax shelter for high-income taxpayers. Gravelle and Hungerford (2008, 422) note that if there were no corporate tax, “high-income individuals could channel funds into corporations and, with a large part of earnings retained, obtain lower tax rates than if they operated in partnership or proprietorship form.”

Corporate profitability

Corporate profitability is at an all-time high. Before-tax corporate profits (excluding the profits of the Federal Reserve banks) have averaged 10.5 percent of national income since the end of World War II (see Figure A).4 The trend in before-tax profits basically displays a U-shaped pattern over this 65-year period—falling from 13.4 percent in 1950, reaching a low of less than 7 percent in the early 1980s, and then increasing over the next three decades. In 2012, before-tax profits were equal to 13.6 percent of national income. Even in the depths of the Great Recession, corporate profits (9.6 percent of national income in 2008) were not far from their historical average.

The trend in after-tax corporate profits as a percentage of national income is also shown in Figure A. Between 1947 and 2012, the average value was 7.4 percent. In 2012, after-tax profits were equal to 11.4 percent of national income. Overall, the trend displays a U-shape that is much shallower than that of before-tax profits. But more importantly, after-tax profits since 2000 have generally been higher than after-tax profits in the 1950s. The gap between before-tax and after-tax corporate profits (as a percentage of national income) was 4 to 5 percentage points throughout the 1950s and most of the 1960s—reaching a high of 7 percentage points in 1951. The gap has narrowed considerably since the early 1980s and was at a low of 1.3 percentage points in 2009.

Figure A

Corporate profits as a percentage of national income, 1947–2012

Year Before-tax After-tax
1947 10.8% 5.9%
1948 12.7% 7.9%
1949 12.0% 8.0%
1950 13.4% 7.0%
1951 13.3% 6.3%
1952 12.0% 6.3%
1953 11.4% 5.8%
1954 11.2% 6.3%
1955 13.1% 7.5%
1956 12.0% 6.8%
1957 11.4% 6.6%
1958 10.1% 5.9%
1959 11.7% 6.9%
1960 11.0% 6.7%
1961 10.9% 6.6%
1962 11.6% 7.5%
1963 12.0% 7.8%
1964 12.4% 8.3%
1965 13.1% 8.8%
1966 12.8% 8.6%
1967 11.8% 8.0%
1968 11.5% 7.5%
1969 10.3% 6.6%
1970 8.5% 5.6%
1971 9.2% 6.2%
1972 9.7% 6.7%
1973 9.6% 6.5%
1974 8.2% 5.2%
1975 8.8% 6.2%
1976 9.7% 6.6%
1977 10.3% 7.2%
1978 10.4% 7.2%
1979 9.6% 6.7%
1980 7.8% 5.4%
1981 7.7% 5.8%
1982 6.7% 5.5%
1983 8.0% 6.5%
1984 8.7% 7.0%
1985 8.6% 7.0%
1986 7.7% 6.0%
1987 8.5% 6.4%
1988 9.0% 7.0%
1989 8.4% 6.4%
1990 8.2% 6.3%
1991 8.4% 6.7%
1992 8.7% 6.8%
1993 9.1% 7.0%
1994 9.9% 7.7%
1995 10.6% 8.2%
1996 11.2% 8.8%
1997 11.6% 9.2%
1998 10.0% 7.7%
1999 9.9% 7.7%
2000 8.8% 6.6%
2001 8.2% 6.7%
2002 9.0% 7.7%
2003 9.7% 7.9%
2004 11.6% 9.4%
2005 12.7% 9.8%
2006 13.1% 10.0%
2007 11.9% 9.2%
2008 9.6% 8.0%
2009 10.7% 9.4%
2010 12.7% 11.0%
2011 13.1% 11.4%
2012 13.6% 11.4%
 
Created with Highcharts 4.0.313.4%6.7%9.6%13.6%11.4%Before-taxAfter-tax1950196019701980199020002010051015%
 
ChartData Download data

The data below can be saved or copied directly into Excel.

"Corporate profits as a percentage of national income, 1947–2012" "From https://www.epi.org/publication/ib364-corporate-tax-rates-and-economic-growth/" "Year" "Before-tax" "After-tax" "1947" "10.8%" "5.9%" "1948" "12.7%" "7.9%" "1949" "12.0%" "8.0%" "1950" "13.4%" "7.0%" "1951" "13.3%" "6.3%" "1952" "12.0%" "6.3%" "1953" "11.4%" "5.8%" "1954" "11.2%" "6.3%" "1955" "13.1%" "7.5%" "1956" "12.0%" "6.8%" "1957" "11.4%" "6.6%" "1958" "10.1%" "5.9%" "1959" "11.7%" "6.9%" "1960" "11.0%" "6.7%" "1961" "10.9%" "6.6%" "1962" "11.6%" "7.5%" "1963" "12.0%" "7.8%" "1964" "12.4%" "8.3%" "1965" "13.1%" "8.8%" "1966" "12.8%" "8.6%" "1967" "11.8%" "8.0%" "1968" "11.5%" "7.5%" "1969" "10.3%" "6.6%" "1970" "8.5%" "5.6%" "1971" "9.2%" "6.2%" "1972" "9.7%" "6.7%" "1973" "9.6%" "6.5%" "1974" "8.2%" "5.2%" "1975" "8.8%" "6.2%" "1976" "9.7%" "6.6%" "1977" "10.3%" "7.2%" "1978" "10.4%" "7.2%" "1979" "9.6%" "6.7%" "1980" "7.8%" "5.4%" "1981" "7.7%" "5.8%" "1982" "6.7%" "5.5%" "1983" "8.0%" "6.5%" "1984" "8.7%" "7.0%" "1985" "8.6%" "7.0%" "1986" "7.7%" "6.0%" "1987" "8.5%" "6.4%" "1988" "9.0%" "7.0%" "1989" "8.4%" "6.4%" "1990" "8.2%" "6.3%" "1991" "8.4%" "6.7%" "1992" "8.7%" "6.8%" "1993" "9.1%" "7.0%" "1994" "9.9%" "7.7%" "1995" "10.6%" "8.2%" "1996" "11.2%" "8.8%" "1997" "11.6%" "9.2%" "1998" "10.0%" "7.7%" "1999" "9.9%" "7.7%" "2000" "8.8%" "6.6%" "2001" "8.2%" "6.7%" "2002" "9.0%" "7.7%" "2003" "9.7%" "7.9%" "2004" "11.6%" "9.4%" "2005" "12.7%" "9.8%" "2006" "13.1%" "10.0%" "2007" "11.9%" "9.2%" "2008" "9.6%" "8.0%" "2009" "10.7%" "9.4%" "2010" "12.7%" "11.0%" "2011" "13.1%" "11.4%" "2012" "13.6%" "11.4%" "Source: Author's analysis of Bureau of Economic Analysis National Income and Product Accounts data "

The data underlying the figure.

 

Source: Author's analysis of Bureau of Economic Analysis National Income and Product Accounts data

Embed

Copy the code below to embed this chart on your website.

<iframe width="100%" height="460" src="https://www.epi.org?p=49664&view=embed&embed_template=charts_v2013_08_21&embed_date=20190730&onp=49845&utm_source=epi_press&utm_medium=chart_embed&utm_campaign=charts_v2" frameborder="0"></iframe>
Download image
 
 
 
 
 
 
 
 

Corporate tax rates and economic growth

At first glance, a link between the statutory corporate tax rate and economic growth appears to go in the “wrong” direction—higher tax rates are consistent with higher economic growth rates! The economy grew at an annual average rate of 3.9 percent between 1950 and 1960, when the statutory corporate tax rate was over 50 percent. Between 2000 and 2010, the statutory corporate tax rate was 35 percent (over 15 percentage points lower than the rate in the 1950s), and annual economic growth averaged 1.8 percent (less than half of the growth rate in the 1950s).

The trend in real GDP growth is displayed in Figure B (dotted line). With its ups and downs since 1947, real GDP growth basically fluctuated around a downward trend. The statutory corporate tax rate is also displayed in Figure B (in dark blue). The tax rate leveled at about 52 to 53 percent through most of the 1950s and 1960s, then fell in steps to 35 percent. Again, this suggests a positive association between GDP growth and corporate tax rates.

Figure B

Economic growth and corporate tax rates, 1947–2010

Year Real GDP growth Effective rate on capital income Statutory rate
1947 -0.9%   38.0%
1948 4.3%   38.0%
1949 -0.5%   38.0%
1950 8.4%   42.0%
1951 7.5%   50.8%
1952 3.8%   52.0%
1953 4.5%   52.0%
1954 -0.6% 58.0% 52.0%
1955 7.0% 44.0% 52.0%
1956 2.0% 46.0% 52.0%
1957 2.0% 48.0% 52.0%
1958 -0.9% 47.0% 52.0%
1959 6.9% 45.0% 52.0%
1960 2.4% 42.0% 52.0%
1961 2.3% 42.0% 52.0%
1962 5.9% 35.0% 52.0%
1963 4.3% 34.0% 52.0%
1964 5.6% 31.0% 50.0%
1965 6.2% 29.0% 48.0%
1966 6.3% 30.0% 52.8%
1967 2.5% 33.0% 52.8%
1968 4.7% 37.0% 52.8%
1969 3.1% 45.0% 52.8%
1970 0.2% 42.0% 49.2%
1971 3.3% 38.0% 48.0%
1972 5.2% 38.0% 48.0%
1973 5.6% 38.0% 48.0%
1974 -0.6% 42.0% 48.0%
1975 -0.2% 44.0% 48.0%
1976 5.2% 40.0% 48.0%
1977 4.5% 40.0% 48.0%
1978 5.4% 46.0% 48.0%
1979 3.1% 45.0% 46.0%
1980 -0.3% 48.0% 46.0%
1981 2.5% 38.0% 46.0%
1982 -2.0% 35.0% 46.0%
1983 4.4% 34.0% 46.0%
1984 6.9% 33.0% 46.0%
1985 4.1% 33.0% 46.0%
1986 3.4% 33.0% 46.0%
1987 3.1% 33.0% 40.0%
1988 4.0% 33.0% 34.0%
1989 3.5% 33.0% 34.0%
1990 1.9% 31.0% 34.0%
1991 -0.2% 30.0% 34.0%
1992 3.3% 30.0% 34.0%
1993 2.8% 31.0% 35.0%
1994 4.0% 30.0% 35.0%
1995 2.5% 31.0% 35.0%
1996 3.7% 31.0% 35.0%
1997 4.4% 31.0% 35.0%
1998 4.3% 30.0% 35.0%
1999 4.7% 30.0% 35.0%
2000 4.1% 31.0% 35.0%
2001 1.1% 30.0% 35.0%
2002 1.8% 29.0% 35.0%
2003 2.5% 23.0% 35.0%
2004 3.4% 26.0% 35.0%
2005 3.0% 30.0% 35.0%
2006 2.6%   35.0%
2007 1.9%   35.0%
2008 -0.3%   35.0%
2009 -3.5%   35.0%
2010 3.0%   35.0%
 
Created with Highcharts 4.0.3Real GDP growthTax rate (percent)Real GDP growthEffective rate on capital incomeStatutory rate-4-20246810%010203040506070%196019802000
 
ChartData Download data

The data below can be saved or copied directly into Excel.

"Economic growth and corporate tax rates, 1947–2010" "From https://www.epi.org/publication/ib364-corporate-tax-rates-and-economic-growth/" "Year" "Real GDP growth" "Effective rate on capital income" "Statutory rate" "1947" "-0.9%" "38.0%" "1948" "4.3%" "38.0%" "1949" "-0.5%" "38.0%" "1950" "8.4%" "42.0%" "1951" "7.5%" "50.8%" "1952" "3.8%" "52.0%" "1953" "4.5%" "52.0%" "1954" "-0.6%" "58.0%" "52.0%" "1955" "7.0%" "44.0%" "52.0%" "1956" "2.0%" "46.0%" "52.0%" "1957" "2.0%" "48.0%" "52.0%" "1958" "-0.9%" "47.0%" "52.0%" "1959" "6.9%" "45.0%" "52.0%" "1960" "2.4%" "42.0%" "52.0%" "1961" "2.3%" "42.0%" "52.0%" "1962" "5.9%" "35.0%" "52.0%" "1963" "4.3%" "34.0%" "52.0%" "1964" "5.6%" "31.0%" "50.0%" "1965" "6.2%" "29.0%" "48.0%" "1966" "6.3%" "30.0%" "52.8%" "1967" "2.5%" "33.0%" "52.8%" "1968" "4.7%" "37.0%" "52.8%" "1969" "3.1%" "45.0%" "52.8%" "1970" "0.2%" "42.0%" "49.2%" "1971" "3.3%" "38.0%" "48.0%" "1972" "5.2%" "38.0%" "48.0%" "1973" "5.6%" "38.0%" "48.0%" "1974" "-0.6%" "42.0%" "48.0%" "1975" "-0.2%" "44.0%" "48.0%" "1976" "5.2%" "40.0%" "48.0%" "1977" "4.5%" "40.0%" "48.0%" "1978" "5.4%" "46.0%" "48.0%" "1979" "3.1%" "45.0%" "46.0%" "1980" "-0.3%" "48.0%" "46.0%" "1981" "2.5%" "38.0%" "46.0%" "1982" "-2.0%" "35.0%" "46.0%" "1983" "4.4%" "34.0%" "46.0%" "1984" "6.9%" "33.0%" "46.0%" "1985" "4.1%" "33.0%" "46.0%" "1986" "3.4%" "33.0%" "46.0%" "1987" "3.1%" "33.0%" "40.0%" "1988" "4.0%" "33.0%" "34.0%" "1989" "3.5%" "33.0%" "34.0%" "1990" "1.9%" "31.0%" "34.0%" "1991" "-0.2%" "30.0%" "34.0%" "1992" "3.3%" "30.0%" "34.0%" "1993" "2.8%" "31.0%" "35.0%" "1994" "4.0%" "30.0%" "35.0%" "1995" "2.5%" "31.0%" "35.0%" "1996" "3.7%" "31.0%" "35.0%" "1997" "4.4%" "31.0%" "35.0%" "1998" "4.3%" "30.0%" "35.0%" "1999" "4.7%" "30.0%" "35.0%" "2000" "4.1%" "31.0%" "35.0%" "2001" "1.1%" "30.0%" "35.0%" "2002" "1.8%" "29.0%" "35.0%" "2003" "2.5%" "23.0%" "35.0%" "2004" "3.4%" "26.0%" "35.0%" "2005" "3.0%" "30.0%" "35.0%" "2006" "2.6%" "35.0%" "2007" "1.9%" "35.0%" "2008" "-0.3%" "35.0%" "2009" "-3.5%" "35.0%" "2010" "3.0%" "35.0%" "Source: Author's analysis of Bureau of Economic Analysis National Income and Product Accounts data (Table 1.1.1), Internal Revenue Service Statistics of Income Historical Table 24, and Gravelle (2006) "

The data underlying the figure.

 

Source: Author's analysis of Bureau of Economic Analysis National Income and Product Accounts data (Table 1.1.1), Internal Revenue Service Statistics of Income Historical Table 24, and Gravelle (2006)

Embed

Copy the code below to embed this chart on your website.

<iframe width="100%" height="460" src="https://www.epi.org?p=49678&view=embed&embed_template=charts_v2013_08_21&embed_date=20190730&onp=49845&utm_source=epi_press&utm_medium=chart_embed&utm_campaign=charts_v2" frameborder="0"></iframe>
Download image
 
 
 
 
 
 
 
 

The statutory corporate tax rate, however, does not necessarily capture the tax burden on new investment (Gravelle 1994). The effective marginal tax rate on earnings from investment could be a better measure of the tax burden.5 The trend in the effective marginal tax rate on capital income between 1953 and 2005 is also displayed in Figure B (in solid light blue).6 Except for a rather large dip followed by a large increase over the 1960s, the overall trend appears to have been downward between 1953 and 2005.

It is possible that the corporate tax rate affects economic growth with a lag. Consequently, real GDP growth is compared with the tax rates from the previous year. Figure C shows the scatter plot of real GDP growth and the 1-year lag of the statutory corporate tax rate between 1948 and 2010.7 The straight line is the trend line defined by the scatter plot.8 The slope of the trend line is upward, and the estimated correlation between the two series is +0.167, suggesting that higher tax rates are related to higher economic growth the next year. This estimated correlation, however, is not statistically significant.9 In other words, there is no apparent association between the statutory corporate tax rate and economic growth.

Figure C

Relationship between statutory corporate tax rate and economic growth, 1948–2010

Real GDP growth Statutory corporate tax rate (1-year lag) Trend line
-3.5 35.0 40.2
-2.0 46.0  
-0.9 52.0  
-0.9 38.0  
-0.6 52.0  
-0.6 48.0  
-0.5 38.0  
-0.3 35.0  
-0.3 46.0  
-0.2 34.0  
-0.2 48.0  
0.2 52.8  
1.1 35.0  
1.8 35.0  
1.9 34.0  
1.9 35.0  
2.0 52.0  
2.0 52.0  
2.3 52.0  
2.4 52.0  
2.5 35.0  
2.5 52.8  
2.5 46.0  
2.5 35.0  
2.6 35.0  
2.8 34.0  
3.0 35.0  
3.0 35.0  
3.1 52.8  
3.1 48.0  
3.1 46.0  
3.3 49.2  
3.3 34.0  
3.4 46.0  
3.4 35.0  
3.5 34.0  
3.7 35.0  
3.8 50.8  
4.0 35.0  
4.0 40.0  
4.1 46.0  
4.1 35.0  
4.3 35.0  
4.3 52.0  
4.3 38.0  
4.4 35.0  
4.4 46.0  
4.5 48.0  
4.5 52.0  
4.7 35.0  
4.7 52.8  
5.2 48.0  
5.2 48.0  
5.4 48.0  
5.6 52.0  
5.6 48.0  
5.9 52.0  
6.2 50.0  
6.3 48.0  
6.9 52.0  
6.9 46.0  
7.0 52.0  
7.5 42.0  
8.4 38.0 46.1
Relationship between statutory corporate tax rate and economic growth, 1948–2010
ChartData Download data

The data below can be saved or copied directly into Excel.

"Relationship between statutory corporate tax rate and economic growth, 1948–2010" "From https://www.epi.org/publication/ib364-corporate-tax-rates-and-economic-growth/" "Real GDP growth" "Statutory corporate tax rate (1-year lag)" "Trend line" "-3.5" "35.0" "40.2" "-2.0" "46.0" "-0.9" "52.0" "-0.9" "38.0" "-0.6" "52.0" "-0.6" "48.0" "-0.5" "38.0" "-0.3" "35.0" "-0.3" "46.0" "-0.2" "34.0" "-0.2" "48.0" "0.2" "52.8" "1.1" "35.0" "1.8" "35.0" "1.9" "34.0" "1.9" "35.0" "2.0" "52.0" "2.0" "52.0" "2.3" "52.0" "2.4" "52.0" "2.5" "35.0" "2.5" "52.8" "2.5" "46.0" "2.5" "35.0" "2.6" "35.0" "2.8" "34.0" "3.0" "35.0" "3.0" "35.0" "3.1" "52.8" "3.1" "48.0" "3.1" "46.0" "3.3" "49.2" "3.3" "34.0" "3.4" "46.0" "3.4" "35.0" "3.5" "34.0" "3.7" "35.0" "3.8" "50.8" "4.0" "35.0" "4.0" "40.0" "4.1" "46.0" "4.1" "35.0" "4.3" "35.0" "4.3" "52.0" "4.3" "38.0" "4.4" "35.0" "4.4" "46.0" "4.5" "48.0" "4.5" "52.0" "4.7" "35.0" "4.7" "52.8" "5.2" "48.0" "5.2" "48.0" "5.4" "48.0" "5.6" "52.0" "5.6" "48.0" "5.9" "52.0" "6.2" "50.0" "6.3" "48.0" "6.9" "52.0" "6.9" "46.0" "7.0" "52.0" "7.5" "42.0" "8.4" "38.0" "46.1" "Note: Each dot shows the real GDP growth rate for a particular year and the statutory corporate tax rate from the previous year. The line describes the relation between the two variables. " "Source: Author's analysis of Bureau of Economic Analysis National Income and Product Accounts data (Table 1.1.1) and Internal Revenue Service Historical Table 24 "

The data underlying the figure.

 

Note: Each dot shows the real GDP growth rate for a particular year and the statutory corporate tax rate from the previous year. The line describes the relation between the two variables.

Source: Author's analysis of Bureau of Economic Analysis National Income and Product Accounts data (Table 1.1.1) and Internal Revenue Service Historical Table 24

Embed

Copy the code below to embed this chart on your website.

<iframe width="100%" height="460" src="https://www.epi.org?p=49728&view=embed&embed_template=charts_v2013_08_21&embed_date=20190730&onp=49845&utm_source=epi_press&utm_medium=chart_embed&utm_campaign=charts_v2" frameborder="0"></iframe>
Download image

Figure D shows the scatter plot of real GDP growth and the 1-year lagged value of the effective marginal tax rate on capital income between 1954 and 2006. The trend line in this case is slightly downward sloping—the “right” direction according to those who argue that higher tax rates *********** economic growth—and the estimated correlation is −0.064. This would suggest that a higher effective marginal tax rate is associated with slower economic growth. The estimated correlation, however, is not statistically significant.10 Again, there appears to be no relationship between capital income taxes and economic growth.

Figure D

Relationship between effective marginal tax rate on capital income and economic growth, 1954–2006

Real GDP growth Effective marginal tax rate on capital income (1-year lag) Trend line
-2.0% 38.0% 37.4%
-0.9% 48.0%  
-0.6% 38.0%  
-0.3% 45.0%  
-0.2% 31.0%  
-0.2% 42.0%  
0.2% 45.0%  
1.1% 31.0%  
1.8% 30.0%  
1.9% 33.0%  
2.0% 44.0%  
2.0% 46.0%  
2.3% 42.0%  
2.4% 45.0%  
2.5% 30.0%  
2.5% 30.0%  
2.5% 48.0%  
2.5% 29.0%  
2.6% 30.0%  
2.8% 30.0%  
3.0% 26.0%  
3.1% 37.0%  
3.1% 46.0%  
3.1% 33.0%  
3.3% 42.0%  
3.3% 30.0%  
3.4% 33.0%  
3.4% 23.0%  
3.5% 33.0%  
3.7% 31.0%  
4.0% 31.0%  
4.0% 33.0%  
4.1% 33.0%  
4.1% 30.0%  
4.3% 31.0%  
4.3% 35.0%  
4.4% 31.0%  
4.4% 35.0%  
4.5% 40.0%  
4.7% 30.0%  
4.7% 33.0%  
5.2% 38.0%  
5.2% 44.0%  
5.4% 40.0%  
5.6% 34.0%  
5.6% 38.0%  
5.9% 42.0%  
6.2% 31.0%  
6.3% 29.0%  
6.9% 47.0%  
6.9% 34.0%  
7.0% 58.0% 35.5%
Relationship between effective marginal tax rate on capital income and economic growth, 1954–2006
ChartData Download data

The data below can be saved or copied directly into Excel.

"Relationship between effective marginal tax rate on capital income and economic growth, 1954–2006" "From https://www.epi.org/publication/ib364-corporate-tax-rates-and-economic-growth/" "Real GDP growth" "Effective marginal tax rate on capital income (1-year lag)" "Trend line" "-2.0%" "38.0%" "37.4%" "-0.9%" "48.0%" "-0.6%" "38.0%" "-0.3%" "45.0%" "-0.2%" "31.0%" "-0.2%" "42.0%" "0.2%" "45.0%" "1.1%" "31.0%" "1.8%" "30.0%" "1.9%" "33.0%" "2.0%" "44.0%" "2.0%" "46.0%" "2.3%" "42.0%" "2.4%" "45.0%" "2.5%" "30.0%" "2.5%" "30.0%" "2.5%" "48.0%" "2.5%" "29.0%" "2.6%" "30.0%" "2.8%" "30.0%" "3.0%" "26.0%" "3.1%" "37.0%" "3.1%" "46.0%" "3.1%" "33.0%" "3.3%" "42.0%" "3.3%" "30.0%" "3.4%" "33.0%" "3.4%" "23.0%" "3.5%" "33.0%" "3.7%" "31.0%" "4.0%" "31.0%" "4.0%" "33.0%" "4.1%" "33.0%" "4.1%" "30.0%" "4.3%" "31.0%" "4.3%" "35.0%" "4.4%" "31.0%" "4.4%" "35.0%" "4.5%" "40.0%" "4.7%" "30.0%" "4.7%" "33.0%" "5.2%" "38.0%" "5.2%" "44.0%" "5.4%" "40.0%" "5.6%" "34.0%" "5.6%" "38.0%" "5.9%" "42.0%" "6.2%" "31.0%" "6.3%" "29.0%" "6.9%" "47.0%" "6.9%" "34.0%" "7.0%" "58.0%" "35.5%" "Note: Each dot shows the real GDP growth rate for a particular year and the effective marginal tax rate on capital income from the previous year. The line describes the relation between the two variables. " "Source: Author's analysis of Bureau of Economic Analysis National Income and Product Accounts data (Table 1.1.1) and Gravelle (2006) "

The data underlying the figure.

 

Note: Each dot shows the real GDP growth rate for a particular year and the effective marginal tax rate on capital income from the previous year. The line describes the relation between the two variables.

Source: Author's analysis of Bureau of Economic Analysis National Income and Product Accounts data (Table 1.1.1) and Gravelle (2006)

Embed

Copy the code below to embed this chart on your website.

<iframe width="100%" height="460" src="https://www.epi.org?p=49770&view=embed&embed_template=charts_v2013_08_21&embed_date=20190730&onp=49845&utm_source=epi_press&utm_medium=chart_embed&utm_campaign=charts_v2" frameborder="0"></iframe>
Download image

Conclusion

Corporate tax reform is a topic of discussion among policy analysts and policymakers. The proposed options range from broadening the tax base/lowering the rates to moving to a territorial system with low tax rates to outright elimination of the corporate income tax. Given that the corporate income tax serves several important functions, outright elimination of the tax is ill advised. The justification for lowering the corporate tax rate is that it will increase economic growth.

In 2012, corporate profits (before- and after-tax) as a share of national income were at a postwar high. Corporate profits were relatively high throughout the late 1940s and 1950s, and fell throughout the 1960s and 1970s to reach a low in 1982. Since then, corporate profits reversed course and have generally been rising to their current postwar high.

The top statutory corporate tax rate has been falling since the early 1950s. The top corporate tax rate was 52 percent throughout the Eisenhower administration—17 percentage points higher than the current top rate of 35 percent. U.S. GDP grew by almost 4 percent annually in the 1950s compared with a 1.8 percent growth rate in the 2000s. On the surface, it would appear that more robust economic growth is associated with higher corporate tax rates. Further analysis, however, finds no evidence that either the statutory top corporate tax rate or the effective marginal tax rate on capital income is correlated with real GDP growth.

About the author

Thomas L. Hungerford joined the Economic Policy Institute in 2013. Prior to joining EPI, Hungerford worked at the General Accounting Office, the Office of Management and Budget, the Social Security Administration, and the Congressional Research Service. He has published research articles in journals such as the Review of Economics and StatisticsJournal of International EconomicsJournal of Human ResourcesJournal of Urban EconomicsReview of Income and WealthJournal of Policy Analysis and ManagementChallenge, and Tax Notes. He has taught economics at Wayne State University, American University, and Johns Hopkins University. He has a Ph.D. in economics from the University of Michigan.

 

https://www.epi.org/publication/ib364-corporate-tax-rates-and-economic-growth/

 

B/A

  • Thanks 1
Link to post
Share on other sites
15 minutes ago, bostonangler said:

 

Well actually it started with Clinton and crashed and burned under "W". Obama did what the Federal Reserve told him to do, print money. The debt of America is a result of bad government and the private bankers who actually own the money... But one day there will be a leader who says enough is enough and end the spending and increase revenue... We just haven't found that person yet...

 

B/A

You Focus too much on money and not enough on the bigger picture

  • Thanks 1
  • Haha 1
Link to post
Share on other sites
Just now, ladyGrace'sDaddy said:

You Focus too much on money and not enough on the bigger picture

 

The bigger picture is our country is becoming a third world nation and our latest leader is sinking us further down the rabbit hole... When will people realize that supporting either party is slow suicide for our nation... Here's is an analogy for you....

 

One day for some unknown reason you decide to hit yourself in the head with a hammer.... You realize that really hurts and you think I'll never do that again... Time goes by and a few years later you think that wasn't so bad, so you pick up that hammer and do it again... And you think how stupid I'll never do that again, but as the years pass you see that hammer sitting on top of your work bench and think, "you know, it can't be that bad" so you pick up that hammer and hit yourself in the head... You realize it still hurts and admit it is still a stupid thing to do...

How many more times are Americans going to pick up that hammer?

 

B/A 

  • Thanks 1
  • Confused 1
Link to post
Share on other sites
26 minutes ago, caddieman said:

 

 

Donald Trump: As projected in Table S-10 in the FY 2020 budget, Trump plans to add $5.088 trillion to the debt in his first term. That's a 30 percent increase from the $20.245 trillion debt at the end of Obama's last budget for FY 2017. If he remains in office for a second term, he plans to add $9.1 trillion. Trump had promised to eliminate the debt during his campaign.

 

oh yeah and “Mexico is going to pay for the wall”

 

  • Thanks 1
  • Haha 2
Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.



×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.