Over the last few decades, U.S. corporate tax revenue plunged to historic lows, falling from about 6 percent of GDP in the 1950s to barely more than 1 percent of GDP today. Obviously, part of the recent low level has to do with the Great Recession and its effect on businesses and their profits. But while corporate profits have rebounded to their pre-recession heights, setting a record in the third quarter of 2011, corporate tax revenue has yet to follow suit:
After plummeting from 2007 through 2009, U.S. corporate profits regained their precrisis peak in early 2010, according to the Bureau of Economic Analysis. The latest, revised data released just before Christmas showed corporate profits before tax rose to a record $1.97 trillion in the third quarter of 2011.
But corporate tax receipts, as reported by the Treasury Department, remain lackluster, even as the economy has gained some ground of late. Although they have trended higher in recent months, corporate taxes measured on a 12-month basis were still under $200 billion in November. That is well below a precrisis peak of about $380 billion and still far below the government’s fiscal 2012 target of $332 billion.
Corporate tax revenue has plummeted for several reasons, but one of the big ones is the growth of deductions, loopholes, and outright tax evasion that helps companies limit, or entirely eliminate, their income tax liability. 30 major corporations, in fact, paid no corporate income tax over the last three years, while making $160 billion in profits.