An expensive but popular tenet of the 2017 Tax Cut and Jobs Act was the cut in corporate income tax from 35% to 21%. Unlike many of the provisions of the TCJA which are set to expire at the end of 2026, this cut was supposedly permanent. However, both presidential candidates have floated potential changes that would have impacts that far outlast their presidency.
The federal corporate income tax rate was as high as 52.8% in 1968 and remained at 35% between 1993 and 2016. The 2017 cut to 21% also made it a flat tax rate and was intended to encourage companies to invest in their US-based operations, bringing jobs and profits to the country (Lautz and Fano, 2024). When combined with complementary corporate tax increases (due to limiting deductions and international tax reform), this reduction is projected to reduce federal revenues by $330 billion (to put this in perspective, in 2023, the federal government collected $4.44 trillion). Studies agree that the reduction of the corporate income tax has increased wages, sales, profit, investment and employment; however, one criticism has been that this has primarily benefited the top 10% of earners, making this a tax cut for the rich.
Therein lies the debate. Harris has proposed increasing the corporate income tax rate to 28%, arguing that corporations should pay their fair share. Meanwhile, Trump has proposed a further reduction to the corporate tax rate – to 15% – arguing that a lower rate would only increase the benefits we’ve already seen. Whether this move benefits Americans in general would remain to be seen, but it would certainly reduce federal tax revenues, and thereby increase the debt-to-GDP ratio.
But these are the federal concerns. On a state level, reducing – or scrapping – the corporate income tax might just make sense. In Fiscal Year 2023, Utah collected $869.9 million in corporate tax and total revenues of $16.18 billion, meaning the corporate tax accounted for just 5.38% of total revenues. Corporate tax is a notoriously volatile revenue source – consider the table below to see the fluctuation in figures – and since Utah consistently runs a surplus, eliminating it entirely would not cause the same revenue concerns that need to be considered on a federal level. In fact, it might make revenues more predictable. Utah might also benefit from increased economic opportunities as a result, and enjoy a competitive advantage over other states.
Source: Annual Report, Utah State Tax Commission, 2023
Although the federal corporate income tax will ultimately be determined by the new President and Congress, Utah has an opportunity to do something only six other states have done: completely eliminate or at least significantly lower the state corporate income tax. Doing so would not drastically affect revenues, but could bring new corporations – and their jobs and capital – to the state.