Do Corporate Tax Cuts Boost Economic Growth?

Executive Summary

Corporate tax cuts promise abundance but deliver little. Across decades of research, governments have justified rate cuts as growth-enhancing reforms. Yet when 441 estimates from 42 studies are systematically re-examined, the empirical record shows no statistically significant or economically relevant link between lower corporate taxes and faster GDP growth. While some papers find positive or negative effects, these cancel out in aggregate.

The apparent consensus in favour of tax cuts is partly illusory. Growth-enhancing results are up to three times more likely to be published than null or negative findings. Once this publication bias is corrected, the average effect of corporate tax changes on growth vanishes.

Data and methods explain much of the disagreement. Studies using effective average tax rates (EATR) tend to report stronger positive effects than those using statutory or marginal rates — but these are statistical outliers. Results also differ by time horizon and model choice, yet remain insignificant when heterogeneity is controlled for.

Holding public spending constant makes tax cuts look slightly better — but not enough to matter. Even where corporate tax cuts coincide with higher private investment, their growth impact is small compared with the effect of public investment financed through corporate revenues. This supports the idea that using such revenues productively can yield higher long-term growth.

Policy implications

1. The policy debate has overstated the role of corporate taxation. Despite its prominence in reform agendas, corporate tax policy appears neither a major growth constraint nor a reliable stimulus tool.
2. Structural reforms should therefore prioritise innovation, skills, and investment rather than tax rate competition.