LIHTC Repeal – Effect on Top Corporate Tax Rate

Published by Michael Novogradac on Tuesday, April 19, 2011 - 12:00am

Have you wondered what impact the repeal of the LIHTC would have on the top corporate tax rate?  In the debate over corporate tax reform, the Holy Grail is to get the top rate of 35% below 30%; some have suggested that if you repeal all corporate tax expenditures you can get to 28%. 

We did some calculations and found that a repeal of the LIHTC, on a prospective basis, would support a reduction in the top corporate rate of a maximum of 0.12% in the first year (down from 35% to 34.88%).  Over 5 years, the average reduction is 0.22% (down to 34.78%) and over ten years, 0.34% down to 34.66%).  The actual reduction would be far less, as our calculations assumed 100% savings in the first year, whereas given the construction and lease-up delays in using LIHTCs, savings are less in the early years.

BTW, if Congress considered the unthinkable, a retroactive repeal, savings are about 0.49% (down from 35% to 34.51%).

And if the savings from the retroactive repeal of LIHTCs were used to also lower individual rates, the top rate of 35% levels off at about 34.89%.

More details here

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