JCT Estimates Revenue Change for Temporarily Reduced Corporate Rate

April 25, 2017

Dear Speaker Ryan:

This letter is in response to your request of April 19, 2017, for a revenue estimate of a temporary tax reduction on income earned by C corporations.

Corporate taxable income is subject to tax under a four-step graduated rate structure. The maximum corporate tax rate is 35 percent on taxable income in excess of $10 million. You requested an estimate of reducing the maximum tax rate on corporate taxable income to 20 percent for tax years 2018, 2019, and 2020. The maximum tax rate returns to present-law rates after 2020.

An estimate of the temporary tax reduction is presented in the table below. We note that we project a nonnegligible revenue loss in the tax years immediately following the budget window notwithstanding the temporary nature of the tax reduction. This is due largely to an increased amount of credits becoming eligible to be carried forward into tax years following 2020 and the lowering of the repatriation baseline resulting from a temporary increase of repatriation of foreign earnings during the period of reduced tax.

The following estimate provides the effect on Federal fiscal year budget receipts assuming an enactment date of October 1, 2017:

Fiscal Years
[Billions of Dollars]

Item	2018	2019	2020	2021	2022	2023	2024	2025	2026	2027	2018-27
Reduce maximum corporate tax rate to 20% in 2018, 2019, and 2020	-114.5	-128.8	-132.5	-55.9	-15.6	-10.7	-9.8	-8.9	-7.1	-5.9	-489.7

NOTE: This estimate is preliminary and subject to change.

I hope this information is helpful to you. If we can be of further assistance in this matter, please let me know,

Sincerely,

Thomas A. Barthold

cc:
George Callas