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The Corporate Tax Burden

1 min readBy: Stephen Slivinski

Download Special Report No. 126

Special Report No. 126

Executive Summary
In October, the Congressional Budget Office released the final revenue figures for fiscal year 2002.1 That year, corporate taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. collections totaled $140 billion, down from $151 billion in 2001. Though the dollar amount of collections fell, corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. collections as a share of total federal revenue edged up slightly from 7.6 percent in fiscal 2001 to 8.0 percent in fiscal 2002. These are both lower than in any year since 1983. Some policymakers in Washington, including presidential aspirants, have pointed to these figures as proof corporations are not paying their fair share of federal taxes. There is, however, more to the story.

Federal dependence on the corporate income tax peaked during World War II and has declined steadily with occasional blips upward ever since. In 1943 the nation collected 39.8 percent of federal revenue from the corporate income tax, but this figure fell rapidly during the post-war years. During the 1970s, the average share was 15 percent, and during the 1980s it was 9.2 percent. During the 1990s, corporate tax collections ticked upward to an average of 11.8 percent of federal revenue because of remarkably strong economic activity and President Clinton’s 1993 tax package, which raised the top statutory corporate income tax rate from 34 percent to 35 percent. Corporate taxes have since resumed their long-term downward trend.

1 Congressional Budget Office, Monthly Budget Review, October 9, 2003.