Friday, July 30, 2004

The Economic Policy Institute has posted Falling Corporate Tax Revenues Push Budget Deficits Even Higher as part of its weekly Economics Snapshots Series. Here are the opening two paragraphs:

Since 2000, the bulk of federal tax cuts have applied to the individual income tax. The effect of these cuts on the deterioration of the federal budget outlook has been a prominent controversy in economic policy. Less noticed has been the erosion of proceeds from the corporate income tax. Tax bills pending in Congress are projected to further deplete revenues and raise budget deficits.

As a share of profits, the postwar average of federal, state, and local corporate income tax revenues is 37%. In the late 1940s, it was as high as 55%. As Figure 1 shows, after some leveling off between 1969 and 1981, the corporate income tax share of profits has stayed well below 37%. After 2000, it dropped by more than a third, from 32% to 20%.