Opinion
Speaker of the House Paul Ryan meets with conservative groups to discuss the Republican tax bill on October 31, 2017. Photo: Bill Clark/CQ Roll Call/Getty Images.

Three Questions: Prof. Rick Antle on Lowering Corporate Taxes

The Republicans’ $1.5 trillion tax package is trundling toward a vote in the Senate. One pillar of the bill is a reduction of the corporate tax rate accompanied by an end to some of the loopholes companies currently utilize to keep their actual tax rate far below the nominal rate. We asked Yale SOM’s Rick Antle, an expert in financial accounting and corporate governance, for further context and insight into how the corporate tax system could be improved.


We sometimes hear from politicians that corporate tax rates are too high. The actual tax rates paid by corporations are much lower than the statute rate. What explains the difference?

The actual rates paid by corporations reflect their efforts at (legally) minimizing taxes. Part of the political argument about rates is that high rates give taxpayers lots of incentives to engineer transactions to achieve desired tax effects. Reducing the rates would lessen these incentives and result in a closer tie between statutory enacted rates and the rates actually paid. That’s the theory, anyway.

Is there anything in the current GOP proposals that is likely to make corporations invest more?

I don’t know all the current proposals, but it is hard to tell in general what tax changes will do to investment. Of course, when there are high tax rates and high interest rates, accelerating deductions can encourage investment by increasing the net present value of the tax shield. But an overall effect of cutting tax rates is, to my knowledge, not well-understood.

What proposal would you make to improve the corporate tax system?

Do you want theory or practice? In theory, a simpler code over all could save the expenditure of a lot of resources directed at tax minimization and tax compliance. In practice, there are so many vested interests—including tax preparers, trusts and estates lawyers, and so on—that I am reluctant to provide a proposal, other than to encourage all sides to work with each other in good faith to simplify things. But, oops, this was supposed to be my “in practice” answer, so take that with a grain of salt.

William S. Beinecke Professor of Accounting