The Role of Taxes in the Disconnect Between Corporate Performance and Economic Growth
We investigate the relation between the growth in corporate profits and the overall U.S. economy, focusing on the impact of the U.S. corporate tax regime on this relation. We document that the growth of corporate profits, on average, has outpaced the growth of the economy, and this disconnect increases as the difference between the corporate income tax rate of the U.S. and the other OECD countries increases. The underlying mechanism is fewer corporate profits being channeled into subsequent domestic investments when the U.S. tax rate is relatively higher, leading to lower economic growth. Our findings have implications for policy setters.
Keywords: taxes; gdp; Corporate profits; American jobs creation Act of 2004; Taxation; Economic Growth; Profit; United States;
Citation:
Khan, Urooj, Suresh Nallareddy, and Ethan Rouen. "The Role of Taxes in the Disconnect Between Corporate Performance and Economic Growth." Management Science (forthcoming). View Details
