While the rest of us will dutifully pay our fair share of taxes on April 18th, some large multinational corporations in the United States won’t be paying any taxes at all this year. The U.S. corporate income tax base has eroded rapidly in recent decades. While corporate income tax revenue was 5.9 percent of GDP in 1952, last year it accounted for only 1.9 percent of GDP.
It’s time to raise, not lower, corporate income taxes: Corporate income tax as a percentage of GDP
| Fiscal Year | Corporate Income Tax |
|---|---|
| 1947 | 3.6% |
| 1948 | 3.7% |
| 1949 | 4.0% |
| 1950 | 3.7% |
| 1951 | 4.3% |
| 1952 | 5.9% |
| 1953 | 5.6% |
| 1954 | 5.4% |
| 1955 | 4.4% |
| 1956 | 4.8% |
| 1957 | 4.6% |
| 1958 | 4.2% |
| 1959 | 3.4% |
| 1960 | 4.0% |
| 1961 | 3.8% |
| 1962 | 3.5% |
| 1963 | 3.5% |
| 1964 | 3.5% |
| 1965 | 3.6% |
| 1966 | 3.8% |
| 1967 | 4.1% |
| 1968 | 3.2% |
| 1969 | 3.7% |
| 1970 | 3.1% |
| 1971 | 2.4% |
| 1972 | 2.6% |
| 1973 | 2.7% |
| 1974 | 2.6% |
| 1975 | 2.5% |
| 1976 | 2.3% |
| 1977 | 2.7% |
| 1978 | 2.6% |
| 1979 | 2.6% |
| 1980 | 2.3% |
| 1981 | 1.9% |
| 1982 | 1.5% |
| 1983 | 1.0% |
| 1984 | 1.4% |
| 1985 | 1.4% |
| 1986 | 1.4% |
| 1987 | 1.8% |
| 1988 | 1.8% |
| 1989 | 1.9% |
| 1990 | 1.6% |
| 1991 | 1.6% |
| 1992 | 1.6% |
| 1993 | 1.7% |
| 1994 | 2.0% |
| 1995 | 2.1% |
| 1996 | 2.2% |
| 1997 | 2.1% |
| 1998 | 2.1% |
| 1999 | 1.9% |
| 2000 | 2.0% |
| 2001 | 1.4% |
| 2002 | 1.4% |
| 2003 | 1.2% |
| 2004 | 1.6% |
| 2005 | 2.2% |
| 2006 | 2.6% |
| 2007 | 2.6% |
| 2008 | 2.1% |
| 2009 | 1.0% |
| 2010 | 1.3% |
| 2011 | 1.2% |
| 2012 | 1.5% |
| 2013 | 1.7% |
| 2014 | 1.9% |
| 2015 | 1.9% |
Source: EPI analysis of Office of Management and Budget data.
The Treasury Department’s recent actions to stem the tide of corporate inversions were an important step in slowing the erosion of the U.S. corporate income tax base. Unfortunately, corporate inversions are just the tip of the iceberg of corporate tax avoidance. The corporate income tax code is riddled with special interest loopholes. For example, businesses can reorganize their legal structure to avoid corporate taxes, and they can defer taxation indefinitely on foreign profits. Congress can and should close these (and other) loopholes.
Beyond closing these loopholes, any corporate tax reform should raise revenue. The corporate income tax largely falls on the owners of capital, making it a steeply progressive form of taxation. Given the rise in economic inequality, we cannot afford to lock in the erosion of such a progressive form of taxation with misguided corporate tax reform that doesn’t raise any net new revenue.