For many years, the US corporate statutory tax rate was the highest among developed nations, at 35%. In 2017, Congress passed the Tax Cuts and Jobs Act, which lowered the corporate statutory tax rate to 21%. While that seems like a big decrease, even at 21%, combined with state taxes, the corporate statutory tax rate was still in the middle of the pack when compared to other developed nations. We had achieved a goldilocks level of tax—not too high, not too low, rather, right in the middle of all the other countries we compete with. President Biden is now proposing to raise the tax rate to 28%, which, when combined with the state taxes that companies in the U.S. face, will put us back at the top again—the highest corporate statutory tax rate. Is that a bad thing? It depends on who you ask. If you are a shareholder in a corporation, whether directly, or through a pension fund or 401(k) account, this might not be great news.
If you are an entrepreneur with a great idea looking to start a company, it also might not be good news. If you are employed by a company, or own your own company taxed as a corporation, it might also not be a good news. However, if you think the federal government needs to provide more services, you will be happy to have the extra revenue this tax increase will bring in.
