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Updated August 27, 2021
Trends and Proposals for Corporate Tax Revenue
Since the mid-1960s, U.S. corporate tax revenues have
about $2 trillion over the next 10 years. Several legislative
declined, relative to the size of the economy. Corporate tax
proposals would increase corporate taxes, in most cases by
revenue as a percentage of gross domestic product (GDP),
altering the international tax structure.
which was 3.9% in 1965, has fallen to approximately 1.0%
in 2020. The decline in corporate tax revenue since 1965 is
Raising the Corporate Tax Rate
due to several factors. Average tax rates have declined,
The corporate tax rate is currently 21%, levied as a flat rate,
primarily due to reductions in the statutory rate and changes
reduced from a top marginal rate of 35% before 2018 by the
in depreciation. The corporate tax base has also been
2017 tax law commonly known as the “Tax Cuts and Jobs
reduced through declining profitability (return on assets),
Act” (TCJA; P.L. 115-97). President Biden has proposed an
increased use of the pass-through organizational form for
increase to 28% with a revenue gain of $858 billion for
businesses, and international profit shifting.
FY2022-FY2031. Senator Sanders has proposed (S. 991) a
graduated corporate rate with most corporate income taxed
Whereas U.S. corporate tax revenue has decreased,
at 35%. President Biden has also proposed an alternative
corporate tax revenue in other Organisation for Economic
minimum tax based on financial or “book” income for
Co-operation and Development (OECD) member countries
corporations with more than $2 billion in earnings.
has, on average, increased. Since 1965, average corporate
tax revenue collected by OECD countries has increased
Increasing the Minimum Tax on Foreign Source
from 2.1% of GDP to 3.1% of GDP in 2018 (see Figure 1).
Income (GILTI)
OECD data indicate that U.S. corporate tax revenue
Several bills in the 117th Congress, including S. 20
(including corporate tax revenue collected by state and local
(Klobuchar), S. 714 (Whitehouse), H.R. 1785 (Doggett),
governments) fell from 3.9% to 1.0% during the same time.
and S. 991 (Sanders) would increase the minimum tax on
foreign source income, known as the tax on Global
Figure 1. Corporate Tax Revenue, as a Percentage of
Intangible Low Taxed Income, or GILTI, enacted in 2017.
GDP, 1965-2018
(See CRS Report R45186, Issues in International
Corporate Taxation: The 2017 Revision (P.L. 115-97), by
Jane G. Gravelle and Donald J. Marples for a discussion of
international tax rules .) Under current law, GILTI targets
intangible income by allowing a deemed deduction equal to
10% of tangible assets. Any remaining income is allowed a
deduction of 50% (37.5% after 2025) and then taxed at
21%.
Credits are allowed for foreign taxes paid; the credits are
limited to U.S. taxes due on foreign-source income, but are
imposed on an overall basis across countries. This allows
for the use of credited taxes paid in high-tax countries to

offset U.S. income tax due in low-tax countries. For GILTI,
Source: OECD Tax on Corporate Profits, https://data.oecd.org/tax/
the credit is limited to up to 80% of foreign taxes paid.
tax-on-corporate-profits.htm, downloaded March 31, 2021.
Note: Tax on corporate profits includes taxes levied by al levels of
The Biden Administration budget proposals and four bills
government.
in the 117th Congress—S. 20, S. 714, H.R. 1785, and S.
991—would make GILTI fully taxable by eliminating the
Figure 1 also shows that the United States collected 1.8
deduction for tangible investment and eliminating the 50%
times as much corporate tax revenue compared to the
deduction. All but S. 991 would impose a 21% rate (the
OECD average in 1965. Since 1981, however, U.S.
current-law rate); S. 991 would impose a rate of 35%. The
corporate tax revenue as a percentage of GDP has been less
Biden Administration plan would allow a deduction to set
than the OECD average (which includes the United States).
the GILTI tax rate at 21% rather than 28%. The credit
In 2018, OECD average corporate tax revenue as a
would be limited by country and most proposals would
percentage of GDP was 3.1 times U.S. corporate tax
increase the GILTI credit to 100%.
revenue as a percentage of GDP.
These proposals appear to be motivated, in part, by
Corporate Tax Proposals
concerns that the exemption for tangible income might
President Biden’s budget proposes an increase in the
encourage the movement of investment abroad. The Biden
amount of revenue raised by the corporate tax system by
proposal would tax foreign oil income at the 21% rate,
https://crsreports.congress.gov

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Trends and Proposals for Corporate Tax Revenue
whereas S. 714, H.R. 1785, and S. 991 would tax all foreign
There are more limited provisions in S. 725 and H.R. 1786
oil income at the full rate.
that reduce the exemption to $100 million. These bills add
certain payments that firms elect to capitalize to BEAT.
A draft proposal by Senators Wyden, Brown, and Warner
would modify GILTI by eliminating the 10% deemed
The President’s proposal would replace BEAT with a
deduction for tangible assets, exempt income in high-tax
disallowance of deductions for payments to foreign entities
countries, and impose a per country limit on foreign tax
in lower-tax jurisdictions. This change is estimated to raise
credits for the remaining countries. The GILTI deduction
revenues by $309 billion over 10 years. The Wyden,
rate and allowable foreign tax credits are not specified.
Brown, and Warner draft would add a higher tier of tax
rates to the base erosion amounts and allow full domestic
The Joint Committee on Taxation (JCT) has estimated that
credits.
the changes to GILTI in S. 991 would increase revenue by
$692 billion from FY2021 to FY2031 with a 21% tax rate.
Anti-Inversion and Treaty-Shopping Rules
The JCT’s estimate includes a repeal of the check-the-box
Under current law, firms that attempt to invert (move their
and look-through rules that limit taxation of certain easily
headquarters abroad) by merging with foreign firms are
shifted income, called Subpart F income. S. 725 and H.R.
treated as U.S. firms if the U.S. shareholders own more than
1786 include provisions that would address these rules.
80% of the shares. There are also penalties if shareholders
own more than 60% of the shares. The President’s proposal,
Repeal of Deduction for Foreign Derived Intangible
S. 991, S. 714, and H.R. 1785, as well as two more
Income (FDII)
narrowly focused bills, S. 1501 (Durbin), and H.R. 2976
In 2017, the foreign derived intangible income deduction
(Doggett) would treat these new firms as U.S. firms if the
(FDII) was aimed at equalizing the treatment of intangibles
U.S. shareholders have more than 50% ownership or if they
located abroad and in the United States. FDII was based on
are managed in the United States. S. 991 would also tighten
the share of exports and a deduction for 10% of tangible
the rules affecting treaty shopping (going through a country
income. S. 714, H.R. 1785, S. 991, and the Biden
that has a treaty with the United States). See CRS Report
Administration proposal would eliminate FDII. The Biden
R40468, Tax Treaty Legislation in the 111th Congress:
proposal would use the revenue to provide additional
Explanation and Economic Analysis, by Donald J. Marples,
incentives for research. As with GILTI, one motivation is
for an explanation of the treaty-shopping issue. The JCT
due to concerns that the deduction for tangible assets might
estimates that the provisions in S. 991 would increase
discourage investment in the United States because an
revenue by $23.5 billion from FY2021 to FY3031.
increase in domestic investment reduces the FDII
deduction. The Wyden, Brown, and Warner draft would
Dual Capacity Shareholder
base the deduction on a percentage of research and human
S. 991, S. 725, and H.R. 1786 would restrict foreign tax
training costs in the United States. The JCT estimates that
credits for taxes paid where an income tax is paid in part to
repealing FDII would increase revenue by $224 billion
receive a benefit (i.e., the firm is paying a tax in a dual
from FY2021 to FY2031.
capacity) to the amount that would be paid if the taxpayer
were not a dual-capacity taxpayer. This provision typically
Limit Interest Expense Deduction for
relates to taxes being substituted for royalties in oil-
Multinationals
producing countries. The JCT estimates this change would
S. 714, H.R. 1785, S. 991, and the Administration propose
increase revenue by $13 billion from FY2021 to FY2031.
to allocate interest deductions among countries based on
their share of income. This provision is aimed at preventing
Other International Provisions
firms from allocating interest deductions to the United
S. 725 and H.R. 1786 would address other areas of
States and out of low-taxed countries. The JCT estimates
international corporate taxation. The proposals would treat
that this provision would increase revenue by $40 billion
swap payments to foreign corporations as sourced to the
from FY2021 to FY2031.
payor rather than the payee, which would subject swap
payments sent abroad to U.S. tax. They would require
Modifying the Base Erosion and Anti-Abuse Tax
firms who file SEC 10-K reports to disclose actual U.S.
(BEAT)
federal, state and local, and foreign taxes paid as well as
BEAT, enacted in 2017, requires corporations to add certain
country-by-country information on revenues, taxes, assets,
payments between related foreign firms and then taxes them
employees, earnings, and profits. The proposals would
at a 10% rate if higher than the regular tax. BEAT has
charge interest on installment payments for the transition
fewer credits than the regular tax. S. 991 would accelerate
tax on accumulated deferred foreign earnings (a provision
the tax rate increase (the 10% rate is scheduled to increase
also included in S. 991). The proposals would include
to 12.5% after 2025) and would eliminate the credits, which
foreign oil-related income in Subpart F. They would also
are also scheduled to expire. It would also reduce the BEAT
tax the gain on the transfer of an intangible asset to a
exemption from $500 million to $25 million and eliminate
foreign partnership. Generally, exchanges of assets in return
an exemption based on the share of base erosion payments
for a share of the partnership would not be taxed. Other
in total payments. It would exclude certain payments that
sections of S. 725 and H.R. 1785 are associated with
are included as U.S. income by the foreign party. According
international tax administration and enforcement.
to the JCT, this provision would increase revenue by $29
billion. Based on the pattern of estimates, about $11 billion
Donald J. Marples, Specialist in Public Finance
of that amount would be from the acceleration provisions.
Jane G. Gravelle, Senior Specialist in Economic Policy
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Trends and Proposals for Corporate Tax Revenue

IF11809


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https://crsreports.congress.gov | IF11809 · VERSION 4 · UPDATED

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