Advanced Taxation Report: Impact of Corporate Tax on US Economy

This report provides an in-depth analysis of advanced taxation, with a particular focus on the US corporate tax system. It examines the impact of the 2017 Tax Cuts and Jobs Act, the corporate income tax rates, and the implications for the economy. The report explores the controversy surrounding corporate tax, discussing the burden of taxation, the effects on employment and wages, and the influence on investment and capital stock. It incorporates neoclassical economic perspectives, illustrating how corporate tax reductions can stimulate economic growth by increasing competitiveness and attracting investments. The report also references various studies and reports from organizations like the IMF and the Tax Foundation to support its arguments, concluding that reducing corporate tax is essential for enhancing the competitiveness of the United States and fostering economic development.

Running Head: ADVANCED TAXATION
ADVANCED TAXATION
Name of the Student
Name of the University
Author Note:

1ADVANCED TAXATION
Introduction
The taxation of United States imposed a 21% tax on the profits reducing it from the 35% of 2017
Tax Cuts and Jobs Act. In 2017 the income tax rate of the corporation raised up to $297.0 with
the accountancy for 9% of the revenue of the total federal system (Staff, Tax Policy Center). The
taxable profits of the corporate sector are equivalent to the receipts of lower allowable deduction
of the corporate sector. It includes the expenses of compensation, taxes of nonfederal systems,
advertising, and depreciation (Tax Foundation). However, according to the news report, the
operating system of the U.S Corporation face other level of income tax imposed by the states.
The corporate tax of the state range 3% of the North Carolina increased into 12% in lowa.
Hence, the average income tax rate for the corporate sector is 6%. According to the present law,
the income taxes of the state and local government are entirely reducible for the corporations. It
refers that, the statutory tax for an individual state is lesser than the tax rate of the headline
(Nytimes.com). The four states including Missouri, Alabama, Louisiana, and Lowa allow partial
deduction of their liability off federal tax against the liability of the State with proper reduction
of the rate of statutory effect.
Discussion
According to the researchers, the taxation system of the United States is in core
controversy from the past few years. The report of 2013 contribute only 1.8% revenue to the
GDP with important compliance and cost of the collections. It is worth mentioning in this regard,
there is a prevalent disagreement on the performance of the corporate tax and the victims of its
consequences (Michel and Adam). According to the public review, the corporate tax is the part
of the owners of the corporation.

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Moving to the impact of Tax Cuts and Jobs Act, the rate of corporate tax in the United
States, stood out the worldwide rate. Considering the other organization of OECD (Organizations
for Economic Co-operation and Development), the U.S corporation tax was observed as the
highest. The reformation of the taxation system bring them to the average (Found, Adam, and
Tomlinson.). It has been stated that, the income tax rate that is closer to the other equivalent
nations discourage the alteration of lesser-tax jurisdiction. However, the new and unique
investments will improve the capital stock, output, productivity, wages, and the growth of
employment.
From the perspective of the economy, the corporate tax are considered as the negative
kind of tax that employees bear as a huge amount of burden. Hence, reducing the corporate
income tax will become a benefit for the workers as a boosting element for productivity
consequently leading to wage growth (Beer et al.). Incorporating the neoclassical perception of
economic view, the public willingness to work for deploying the capital is the main driver of
economic output.
Figure 1: Corporate Income Tax Rate

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There is a misconception that, the most of the taxation of the corporation bore by the
corporate income. However, it is worth mentioning that, the burden of the corporate tax is
divided between the employees via lesser wages and the corporate owners. The movement of
capital responding to the increased statutory rate of the income tax, the productivity of the
immobile employees decreases. The empirical studies demonstrate that, half or entirely 100% of
the taxation burden are posed on the income tax of the corporation (Chen, Daphne, and
Schlagenhauf). For a long run effect, it was split among the capital and the workers. Hence, it is
quite important to understand that, the reduction of corporate tax is the main key driver of the
increased capital stock, rate of employment, wages, and the overall growth of the economic
system.
Figure 2: Lower Business tax rates increasing the worker pay
Conclusion
In conclusion, it can be said that, the taxation reforms is a process that balance the budget
with endogenous taxes of wages. The Tax cuts and Jobs Act brought a significant change that
drive the desired economies effect in influencing the employment, output, investment, and

4ADVANCED TAXATION
wages. Hence, reducing the corporate tax is the way to increasing the competitiveness of the
United States. The permanently decreased corporate tax makes United States increasingly
attractive place for the outer organizations to impose more investments.
References
Beer, Sebastian, Mr Alexander D. Klemm, and Ms Thornton Matheson. Tax Spillovers from US
Corporate Income Tax Reform. International Monetary Fund, 2018.
Chen, Daphne, Shi Qi, and Don Schlagenhauf. "Corporate income tax, legal form of
organization, and employment." American Economic Journal: Macroeconomics 10.4
(2018): 270-304.
Found, Adam, and Peter Tomlinson. "Business Tax Burdens in Canada’s Major Cities: The 2018
Report Card." CD Howe Institute e-Brief 286 (2018).
Michel, Adam N. "Four Priorities for Tax Reform 2.0—and Seven Supporting
Reforms." Heritage Foundation Issue Brief 4888 (2018).
Nytimes.com. "Bloomberg Proposes $5 Trillion In Taxes On The Rich And
Corporations". Nytimes.Com, 2020, https://www.nytimes.com/2020/02/01/us/politics/michael-
bloomberg-tax-plan.html.
Staff, Tax Policy Center. "Distributional analysis of the conference agreement for the Tax Cuts
and Jobs Act." Washington, DC: Urban-Brookings Tax Policy Center 2100 (2017).
Tax Foundation. "Analysis Of 2020 Corporate Tax Proposals". Tax Foundation, 2020,
https://taxfoundation.org/2020-corporate-tax-proposals/.