The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.
The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and local
levels. We are a 501(c)(3) non-profit
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Corporate Income Tax
Cuts Won’t Generate
• A temporary cut to the corporate income tax rate is substantially less
effective at generating economic growth than a permanent cut.
• A ten-year reduction in the U.S. corporate income tax rate to 15 percent
would boost investment and growth over the first seven years of the policy,
but then reduce growth.
• The specter of a future tax increase makes investment under a temporary low
rate less enticing, especially for long-lived assets.
• A temporary corporate income tax cut is most likely to result in higher
payouts to shareholders of corporations; a permanent corporate income tax
cut has a much better chance to result in increased wages as well.
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In recent months, Republicans in the federal government and in Congress have been considering
tax reform ideas. One issue that lawmakers are considering is the difference between temporary
and permanent changes in tax policy. While most would prefer to make permanent policy changes,
there are procedural limits in the U.S. Senate on permanent policy changes that increase the budget
Because of these procedural limitations, some lawmakers have taken to considering the merits of a
temporary tax cut plan as well, which would sunset after ten years, much like the tax cuts enacted by
President George W. Bush in 2001 and 2003.
There are many trade-offs involved in this kind of decision. This report will cover one of