Quick Take: Corporate Tax Rate in the TCJA

By December 14, 2017 November 20th, 2019 Market Commentary

Both the House and the Senate versions of the Tax Cuts and Jobs Act (TCJA) included a 20% proposed corporate tax rate. Recently that number was adjusted to 21%, as lawmakers from both the House and Senate made progress in consolidating the two versions into a single bill. While a 21% corporate tax rate is appealing, the impact is not quite as broad as it may appear when you consider the effective tax rate across the S&P 500.

As the chart illustrates, the average effective tax rate of S&P 500 companies today is 24%, not significantly above the proposed rate in the TCJA and well below the current corporate tax rate of 35%. That said, some sectors do pay something closer to the 35%, and those stand to benefit more from the reduced corporate rate proposed in the bill.

For a more in-depth look at the potential winners and losers under the tax plan, read our full tax reform commentary on Harvest: Tax Reform in Focus: 6 Key Elements of the Tax Plan

1. Source: Bloomberg (using 3Q17 effective tax rates)