On Tuesday, February 11, 2020, RSF trustee Jason Furman (Harvard Kennedy School) testified before the House Ways and Means Committee on “The Disappearing Corporate Income Tax” (read his prepared testimony here). Furman spoke about developments in revenue and the economy since the passage of the 2017 tax law. He also made recommendations for the next phase of business tax reform, which would both raise revenue and increase economic growth, as he outlines in this recent paper for The Hamilton Project.
Furman made four main points during his testimony
1. Corporate tax collections are very low both in historical perspective and compared with other countries. This contributes to the overall low level of revenue.
2. The 2017 tax law (Public Law 115-97) is a major reason for this revenue loss, with its total cost likely to be even larger than was estimated when the law originally passed.
3. There is no evidence that the 2017 tax law has made a substantial contribution to investment or longer-term economic growth. In fact, business investment growth has slowed to nearly a halt while economic growth has been propped up by increases in government spending.
4. Going forward, a well-designed business tax reform could both increase revenue and encourage more investment and innovation.
Furman is Professor of the Practice of Economic Policy at Harvard Kennedy School. He served as the 28th Chairman of the Council of Economic Advisers from August 2013 to January 2017, acting as both President Obama’s chief economist and a member of the cabinet. He joined the RSF board of trustees in 2018.