Because the U.S. corporate tax rate is 35 percent — compared to an average of 25 percent in the rest of the industrialized world — U.S. businesses are moving investment overseas and foreign businesses are investing less in the United States. Through its impact on economic growth, tax policy can have notable effects on the economy. Policies that dampen growth may also adversely affect consumer spending.
This report from Ernst & Young for the National Retail Federation examines the potential impact on consumers and the overall economy of inaction on tax reform in the United States over the past several decades and the potential economic benefits that could arise from reform of the U.S. tax system.
Ernst & Young examined leading research and analysis on corporate tax rates to find that the relatively high U.S. rate has been found to discourage U.S. investment and U.S. capital accumulation and, ultimately, to reduce labor productivity and living standards in the United States.
