What role does corporate tax play in companies leaving America?
Executive summary
Corporate taxes are a significant factor in some firms’ decisions to relocate headquarters or shift profits abroad, largely through tactics like inversions and profit-shifting; the U.S. statutory federal corporate rate was 21% in 2025, with combined federal+state burdens varying by location and sometimes reaching mid-to-high 20s or 30s [1] [2]. But reporting and policy analysis show corporate departures are driven by a mix of tax rules (deferral, international regimes, credits), trade/tariff pressures, state tax differences, and non‑tax business reasons — and reforms since 2017 and in 2025 changed incentives in both directions [3] [4] [5].
1. Corporate tax is a clear magnet — but not the only one
Journalistic accounts of past “inversions” describe companies flipping their parent structure after buying a smaller foreign firm to take advantage of lower foreign taxes — a move explicitly aimed at reducing U.S. tax bills [4]. PBS’s reporting explains how U.S. rules that historically allowed deferral of taxes on offshore subsidiary profits created incentives to keep earnings abroad, which encouraged various forms of relocation or profit-shifting [3]. At the same time, commentators and tax advisors warn that non‑tax factors — access to markets, regulation, labor and supply chains — also matter, so taxes are one among several strategic incentives (not found in current reporting).
2. The headline rate matters — but effective rates and international rules matter more
The federal statutory corporate rate was widely reported as 21% in 2025, after the 2017 TCJA cut from 35% [1] [6]. But experts emphasize that the “effective” tax burden depends on deductions, credits, and state taxes; combined federal and state burdens vary by location and can reach the mid‑20s to low‑30s in some places, complicating simple “rate-comparison” arguments [2] [7]. Policy analyses note that changes to international tax rules (GILTI, foreign tax credits, BEAT/UTPR adjustments) and incentives like bonus depreciation shape the real tradeoffs firms face, sometimes more than the headline rate [8] [5].
3. Policy changes reshape incentives — examples from 2017–2025
The TCJA’s 2017 rate cut to 21% and its international provisions altered incentives: proponents argued lower rates would keep activity domestic, critics said other provisions still encouraged offshoring [6] [9]. Subsequent 2025 legislation (the One Big Beautiful Bill Act and related changes) permanently extended some expensing rules and adjusted international tax mechanics, which analysts say both reduce and create different offshoring incentives depending on industry and firm structure [5] [10]. These shifts mean firms reassess whether moving legal headquarters or shifting assets still delivers tax benefits [10].
4. State tax variation drives location choices within the U.S.
Forty‑four states levy corporate income taxes with wide dispersion — from states with near‑zero or alternative gross‑receipts regimes to others with top marginal rates above 11% — so domestic relocation decisions often hinge on state regimes, not just federal law [7] [11]. For example, North Carolina’s 2025 corporate rate fell to 2.25%, while New Jersey remained among the highest; firms weigh these differences when choosing plants, headquarters, and legal domiciles [7].
5. Some firms leave on paper; others shift profits while keeping operations
Historical lists of “iconic” U.S. firms that moved headquarters abroad (e.g., through inversion deals) show tax motives were often explicit or reported, but operational footprints sometimes remained mainly in the U.S., illustrating the distinction between legal domicile and where jobs or production occur [12]. Money’s explainers on inversions emphasize that many deals change tax status without immediately uprooting operations, which complicates public perceptions of “companies leaving America” [4].
6. Competing perspectives: competitiveness vs. lost revenue
Pro‑reform stakeholders argue that higher corporate taxes undermine U.S. competitiveness and can drive firms—and jobs—abroad unless rates and international rules are aligned competitively [13]. Critics counter that loopholes and preferential provisions have enabled profit‑shifting and that targeted changes can reduce offshoring while raising revenue; recent 2025 changes aimed to curb some incentives for offshoring [8] [5]. Both sides use evidence about effective rates and behavioral responses; available sources do not settle which effect dominates across all firms (not found in current reporting).
7. Takeaway for readers and policymakers
Corporate tax matters to firm location decisions, but it acts through a complex mix of statutory rates, effective taxation after credits and deductions, international tax mechanics, and state‑level disparities — and interacts with trade and non‑tax business factors such as tariffs and supply chains [2] [14] [3]. Recent and pending reforms in 2025 altered incentives in both directions, so simple claims that corporate tax alone is the reason companies “leave America” are incomplete; the evidence in reporting shows tax is a major piece of a multi‑factor decision [5] [4].