Revised October 24, 2003


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A new Center report, The Decline of Corporate Income Tax Revenues, provides context for the debate over corporate tax-cut legislation now before Congress.

It shows that corporate tax revenues have fallen to historically low levels as a share of total federal revenues and of the economy.  Despite the weakening of corporate tax revenues, and despite the fact that the Congressional Budget Office and other organizations* now project very large federal budget deficits over the coming decade and beyond, Congress appears poised to shower costly new tax breaks on corporations.

The recent economic slowdown has played a substantial role in the collapse of corporate tax revenues. But tax cuts enacted over the past few years have contributed significantly as well.

Moreover, CBO projects that corporate tax revenues will remain at historically low levels throughout the coming decade, even after the economy has fully recovered and even if the corporate tax cuts enacted in 2002 and 2003 expire as scheduled, which seems unlikely.

Furthermore, as the graph at right shows, the corporate tax burden in other OECD countries has increased in recent decades, while in the United States it has declined.

Indeed, both the measure introduced by House Ways and Means Chairman Thomas (H.R. 2896) and the measure adopted by the Senate Finance Committee on October 1 (S. 1637) include significantly more than $50 billion in new corporate tax cuts.  Both bills use timing gimmicks to hide their true cost.  The House bill includes a number of tax cuts that artificially expire before the end of the ten-year period; these tax cuts would very likely be extended, making the bill much more costly.  The Senate bill contains several tax cuts that do not become fully effective until late in the decade; thus it is deficit-neutral over the first ten years but will cost billions of dollars annually once the tax cuts are in effect.

End note:

*  A joint analysis by the Center on Budget and Policy Priorities, the Concord Coalition, and the Committee for Economic Development projects deficits totaling $5 trillion through 2013; Goldman Sachs estimates deficits totaling $5.5 trillion over this period.