If the Trump administration’s misguided tariff policy has proved anything, it’s that corporate America can afford to pay higher tax rates without the disruptions that Republican devotees of supply-side economics always say are inevitable. This is an important lesson as the warnings over the country’s elevated debt and federal budget deficits become more dire.

For supply siders, higher taxes are like kryptonite to an economy, discouraging businesses from investing and damping entrepreneurial activity. And yet, the economy has proven remarkably resilient despite the tariffs, which are similar to a tax on businesses and consumers. The duties — paid by importers and either absorbed by them or passed on to customers — brought the U.S. Treasury around $29.5 billion a month in extra revenue over the second half of 2025. Even so, the median estimate of economists surveyed by Bloomberg for 2025 gross domestic product rose, from around 1.35% in the wake of the “Liberation Day” tariff announcement in April to the current 2.2%.

To be clear, this is not an endorsement of tariffs, which tend to make American businesses less competitive, or the chaotic way they have been applied, raised, reduced and raised again based on Trump’s whims, making it almost impossible for businesses to plan. (Remember when Trump set a punitive, randomly selected 39% levy on imports from Switzerland after a phone call he had with that nation’s female president because, in Trump’s words, “the woman was nice, but she didn’t want to listen”?) The Supreme Court last month saw through the folly of Trump bypassing Congress to unilaterally impose tariffs under the guise of a “national emergency” and ruled that doing so was illegal.

But what the tariffs have shown is that the economy can withstand a higher tax rate on corporate America without the feared side effects. As it is, the U.S. is generally a low-tax country, ranking 32 out of 38 OECD nations in terms of the tax-to-GDP ratio in 2023. America’s ratio of 25.2% was well below the average of 33.9%. The Republicans’ One Big Beautiful Bill Act, passed last year, made permanent the 21% corporate tax rate that was due to expire under the first Trump administration’s Tax Cuts and Jobs Act of 2017 (TCJA). In addition, businesses got all sorts of goodies, such as favorable treatment of expensing for research and development, while funding was slashed for health-care programs, food assistance and clean-energy projects. For the 24 years before the TCJA, the corporate tax rate was 35% for taxable income of $10 million.

Lower tax rates helped S&P 500 Index companies deliver record profit margins of 13.2 to end 2025. And as my Bloomberg Opinion colleague Kathryn Edwards noted, earnings have averaged 9% of GDP since 2021 after having reached 8% only once in the previous 94 years. And note that statutory corporate income tax rate has steadily fallen from 52% in 1960, while federal tax revenue from corporations has decreased from 4% of GDP to just 1.8% in the same period.

Also note that the 1950s were a great time for equities even with high corporate tax rates, as the S&P 500 surged 193% over the decade. As for GDP, it grew an average of 4.24% each year. To be sure, it would not take anything close to 1950s corporate tax rates to make a large dent in deficits. Diving into the math: Corporate tax receipts totaled $567 billion in 2024, or 1.8% of the $31.5 trillion in GDP. If the government gets that to just 2.5% of GDP, receipts would rise closer to $800 billion — and likely much more assuming the economy keeps expanding. That extra $233 billion a year isn’t much below what the nonpartisan Congressional Budget Office expected the tariffs to raise.

Unlike tariffs, taxes can be fine tuned to shield small businesses just like with individuals. Plus, they offer surety, in that they are set by Congress and can’t be changed on the whims of the White House.

There is not doubt that the government’s need to find ways to boost revenue is becoming more urgent. The U.S. spent $7 trillion in 2025 and collected some $5.2 trillion in revenue. That $1.8 trillion deficit was 5.8% of GDP. In its February update, the Congressional Budget Office forecast the gap will expand to more than $3 trillion over the next 10 years, or 6.7% of GDP. The extra borrowing needed to cover the shortfall will cause federal debt held by the public to rise from 99% of GDP to a record 120%.

It’s not like corporate tax receipts at 2.5% of GDP would be a major burden on businesses or restrain the economy. It’s essentially how things looked just before the global financial crisis in 2006, a period when the economy and profits boomed. Back then, the U.S. made steady progress in shrinking the deficit from around 3.8% in 2004, following a recession, to 1% in early 2007 as the economy grew comfortably faster than 3%.

Supply-side economics grew popular in the 1980s under President Ronald Reagan and his fellow Republicans. The thinking was that tax cuts, deregulation and other breaks would encourage businesses to invest, with the benefits trickling down to workers and the economy overall. Or, as Reagan would say, “a rising tide lifts all boats.” Although that’s debatable, what’s not is that “Reaganomics” did little to nothing for debt and deficits. It took a Democrat — Bill Clinton — to finally eliminate the federal budget deficit for the first time in a generation in the late 1990s.

So, yes, the U.S. economy — the most resilient and dynamic anywhere in the world — could continue to thrive with a corporate tax rate that’s just a smidge higher than the current 21%. That’s the real tariff lesson. Were lawmakers paying attention?

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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Robert Burgess is the executive editor of Bloomberg Opinion. Previously, he was the global executive editor in charge of financial markets for Bloomberg News.

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