Raising the Corporate Tax Rate Would Bring Back Inversions

The 2017 Tax Cuts and Jobs Act fixed a major problem in the U.S. tax code. For years, America’s high corporate tax rate and flawed international rules pushed companies to move overseas on paper, taking profits, headquarters, and long-term investment with them. A new push to raise the corporate rate would risk reopening that wound.

Stephen Moore and Committee to Unleash Prosperity recently highlighted what happened after tax reform. As Moore notes, corporate inversions effectively disappeared after the 2017 law changed the incentives. A Heritage Foundation chart he circulated shows zero corporate inversions from 2018 through 2022 after years in which inversions were a recurring problem.

Tax Reform Changed the Incentives

Before the 2017 law, the United States was an obvious outlier. The federal corporate tax rate stood at 35%, which helped make the U.S. one of the least competitive places in the developed world to headquarter a major business. The Tax Cuts and Jobs Act lowered the federal corporate rate to 21% and paired that with broader international tax reforms that reduced the incentive to shift profits and headquarters abroad.

Corporate tax policy does more than determine what government collects on paper. It shapes where businesses invest, where they book income, and where they decide to grow. When the tax penalty for staying in America falls, the pressure to leave falls with it. That is exactly what the post-2017 inversion data shows.

A Rate Hike Would Move in the Wrong Direction

Kyle Pomerleau’s AEI op-ed makes the case clearly: a corporate rate hike is still unwise. Lawmakers may be tempted to revisit the corporate rate as they search for revenue, but doing so would weaken U.S. competitiveness at the very time policymakers should be trying to preserve it.

The current U.S. federal corporate rate is 21%. Tax Foundation data shows the average statutory corporate tax rate among OECD countries is 24.2%, while the broader average across 141 jurisdictions is 21.2%. The United States is no longer the glaring high-tax outlier it once was. Raising the rate would move America back toward the top of the pack for the wrong reason.

Supporters of a higher corporate rate often talk as if companies would simply absorb the cost and move on. The record says otherwise. When tax rules make it more attractive to invest, report profits, or relocate elsewhere, firms respond. That is not a theory. It is what the inversion wave before 2017 demonstrated.

The International Fight Still Matters

This debate is not happening in a vacuum. International tax competition is still real, and global minimum tax efforts remain in play through the OECD’s Pillar Two framework. The OECD continues to describe Pillar Two as a coordinated global minimum tax regime for large multinational firms.

That makes it even more important for the United States to avoid self-inflicted mistakes. A stable and competitive domestic tax system gives companies fewer reasons to look abroad and gives Washington a stronger position when international tax rules are in flux. Higher corporate tax rates would do the opposite.

CFE Takeaway

The lesson from the post-2017 years is simple. Lowering the corporate rate and improving the international tax rules helped stop the inversion problem that had plagued the United States for years. That was a real policy win.

Washington should not forget that history. Raising the corporate tax rate would not be a harmless revenue grab. It would risk reviving the same incentives that pushed companies to leave in the first place. A competitive tax system keeps businesses, investment, and jobs in the United States. The right move is to protect that progress, not reverse it.