BEA: Corporate Income Tax Collections in 2007 Grew at Slowest Pace in Five Years

March 27, 2008

This morning, the Bureau of Economic Analysis (BEA) reported finalized GDP numbers for the fourth quarter of GDP, as well as figures for corporate profits and corporate income taxes paid for calendar year 2007. They show corporate income taxes growing at only a 2.1 percent pace in 2007, which is down by a lot compared to growth in 2006, which was 15.7 percent and 2005 when growth was 28.4 percent. The Congressional Budget Office is actually forecasting a decline (not just slower growth) in corporate income tax collections for this fiscal year.

As a general rule, corporate income tax collections are much more volatile from year-to-year than other taxes, especially sales taxes and taxes on wages and salaries. Therefore, one downside to raising taxes on corporations, although the tax is often politically easy and a necessary backstop for the income tax system that we have, is that the revenue source is much more susceptible to large swings from year-to-year.

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