Why Have Corporate Tax Revenues Declined? Another Look

26 Pages Posted: 21 Aug 2006 Last revised: 17 Sep 2010

See all articles by Alan J. Auerbach

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Date Written: August 2006

Abstract

As a share of GDP, U.S. federal tax revenues from nonfinancial corporations have held relatively constant since the early 1980s, after falling precipitously during the late 1960s and the 1970s. But this relative constancy masks offsetting trends in the ratio of nonfinancial C corporation profits to GDP (declining) and the average tax rate on these profits (increasing). The average tax rate rose steadily between 1996 and 2003, an increase largely attributable to an unprecedented rise in the importance of tax losses. This rise casts some doubt on the importance of tax planning activities as a vehicle for reducing corporate taxes. So, too, does the relative stability of the rate of profit (relative to net assets), which might be expected to have declined had the understatement of profits for tax purposes been increasing.

Suggested Citation

Auerbach, Alan Jeffrey, Why Have Corporate Tax Revenues Declined? Another Look (August 2006). NBER Working Paper No. w12463. Available at SSRN: https://ssrn.com/abstract=924749

Alan Jeffrey Auerbach (Contact Author)

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