Trends and Proposals for Corporate Tax Revenue
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Updated December 17, 2021
Trends and Proposals for Corporate Tax Revenue
Since the mid-1960s, U.S. corporate tax revenues have
The Senate Finance Committee draft of the BBBA contains
declined, relative to the size of the economy. Corporate tax
similar provisions.
revenue as a percentage of gross domestic product (GDP),
which was 3.9% in 1965, has fallen to approximately 1.0%
Raising the Corporate Tax Rate
in 2020. The decline in corporate tax revenue since 1965 is
The corporate tax rate is currently 21%, levied as a flat rate,
due to several factors. Average tax rates have declined,
reduced from a top marginal rate of 35% before 2018 by the
primarily due to reductions in the statutory rate and changes
2017 tax law commonly known as the “Tax Cuts and Jobs
in depreciation. The corporate tax base has also been
Act” (TCJA; P.L. 115-97). President Biden has proposed an
reduced through declining profitability (return on assets),
increase to 28% with a revenue gain of $858 billion for
increased use of the pass-through organizational form for
FY2022-FY2031. Senator Sanders has proposed (S. 991) a
businesses, and international profit shifting.
graduated corporate rate with most corporate income taxed
at 35%. President Biden has also proposed an alternative
Whereas U.S. corporate tax revenue has decreased,
minimum tax based on financial or “book” income for
corporate tax revenue in other Organization for Economic
corporations with more than $2 billion in earnings. The
Co-operation and Development (OECD) member countries
BBBA would impose a minimum tax of 15% on firms with
has, on average, increased. Since 1965, average corporate
$1 billion or more in earnings. Senator Warren’s proposal
tax revenue collected by OECD countries has increased
(S. 2680) would impose a minimum tax on corporations
from 2.1% of GDP to 3.1% of GDP in 2018 (see Figure 1).
with over $100 million in earnings.
Figure 1. Corporate Tax Revenue, as a Percentage of
GDP, 1965-2018
Increasing the Minimum Tax on Foreign Source
Income (GILTI)
Several bills in the 117th Congress, including S. 20
(Klobuchar), S. 714 (Whitehouse), H.R. 1785 (Doggett), S.
991 (Sanders), and the BBBA would increase the minimum
tax on foreign source income, known as the tax on Global
Intangible Low Taxed Income or GILTI, enacted in 2017.
(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
Source: OECD Tax on Corporate Profits, https://data.oecd.org/tax/
21%, leading to a tax rate of 10.5% (13.125% after 2025).
tax-on-corporate-profits.htm, downloaded March 31, 2021.
Foreign oil extraction income is excluded and not subject to
Note: Tax on corporate profits includes taxes levied by all levels of
any U.S. tax.
government.
Current law allows credits for foreign taxes paid; the credits
Figure 1 also shows that the United States collected 1.8
are limited to U.S. taxes due on foreign-source income, but
times as much corporate tax revenue compared to the
are imposed on an overall basis across countries. This
OECD average in 1965. Since 1981, however, U.S.
treatment allows for the use of credited taxes paid in high-
corporate tax revenue as a percentage of GDP has been less
tax countries to offset U.S. income tax due in low-tax
than the OECD average (which includes the United States).
countries. For GILTI, the credit is limited to 80% of foreign
In 2018, OECD average corporate tax revenue as a
taxes paid.
percentage of GDP was 3.1 times U.S. corporate tax
The Biden Administration’s budget and four bills in the
revenue as a percentage of GDP.
117th Congress—S. 20, S. 714, H.R. 1785, and S. 991—
Corporate Tax Proposals
would eliminate the deemed deduction for tangible assets
and tax GILTI at 21% (35% in S. 991). The BBBA would
President Biden’s budget proposes an increase in the
amount of revenue raised by the corporate tax system by
reduce the deemed deduction to 5% and tax GILTI at
15.051%. In all of the proposals, the foreign tax credit
about $2 trillion over the next 10 years. Several legislative
would be limited by country, and most proposals would
proposals would increase corporate taxes, in most cases by
altering the international tax structure. The House-passed
increase the GILTI credit to 100% (95% in the BBBA).
Foreign oil extraction income is included in GILTI in both
Build Back Better Act (BBBA; H.R. 5376) would raise
BBBA and the Administration proposal..
around $800 billion in corporate taxes in FY2022-FY2031.
https://crsreports.congress.gov
Trends and Proposals for Corporate Tax Revenue
These proposals appear to be motivated, in part, by
shares. The President’s proposal, S. 991, S. 714, and H.R.
concerns that the exemption for tangible income might
1785, as well as two more narrowly focused bills, S. 1501
encourage the movement of investment abroad.
(Durbin) and H.R. 2976 (Doggett), would treat these new
firms as U.S. firms if the U.S. shareholders have more than
Repeal of Deduction for Foreign-Derived Intangible
50% ownership or if they are managed in the United States.
Income
The Senate Finance Committee draft of the BBBA would
In 2017, the TCJA created the foreign-derived intangible
treat inverted firms as U.S. firms if U.S. shareholders own
income (FDII) deduction, aimed at equalizing the treatment
65% of the firm and replace the 60% level with 50%. S. 991
of intangibles located abroad and in the United States. FDII
would also tighten the rules affecting treaty shopping
is based on a firm’s share of exports and a deemed
(going through a country that has a treaty with the United
deduction for 10% of tangible income, with the remaining
States). See CRS Report R40468, Tax Treaty Legislation in
income allowed a deduction of 37.5% (21.875% after
the 111th Congress: Explanation and Economic Analysis,
2025), leading to a tax rate of 13.125% (16.4% after 2025).
by Donald J. Marples for an explanation of the treaty-
S. 714, H.R. 1785, S. 991, and the Biden Administration
shopping issue.
proposal would eliminate FDII. The BBBA would tax FDII
at 20.7%. The Biden proposal would use the revenue to
Dual Capacity Shareholder
provide additional incentives for research. As with GILTI,
S. 991, S. 725, H.R. 1786, and the BBBA would restrict
one motivation for these proposals is due to concerns that
foreign tax credits for taxes paid where an income tax is
the deduction for tangible assets might discourage
paid in part to receive a benefit (i.e., the firm is paying a tax
investment in the United States.
in a dual capacity) to the amount that would be paid if the
taxpayer were not a dual-capacity taxpayer. This provision
Limit Interest Expense Deduction for
typically relates to taxes being substituted for royalties in
Multinationals
oil-producing countries.
S. 714, H.R. 1785, S. 991, the BBBA, and the
Administration propose to allocate interest deductions
Other International Provisions
among countries based on their share of income. This
S. 725, H.R. 1786, S. 991, and the BBBA would address
provision is aimed at preventing firms from allocating
other areas of international corporate taxation. Other
interest deductions to the United States and out of low-
sections of S. 725 and H.R. 1786 are associated with
taxed countries. The Senate Finance Committee draft of the
international tax administration and enforcement. The
BBBA provides an election to allocate on the basis of
BBBA also contains other international provisions,
assets.
including limiting the deduction for foreign dividends for
U.S. shareholders with a 10% ownership to dividends from
Modifying the Base Erosion and Anti-Abuse Tax
controlled foreign corporations (CFCs) and making changes
The base erosion and anti-abuse tax (BEAT), enacted in
to limit certain “downward attribution” rules that create
2017, requires corporations to add certain payments
CFC status for some foreign-related firms and subject them
between related foreign firms and then taxes them at a 10%
to GILTI. The BBBA and the Wyden, Brown, and Warner
rate (12.5% after 2025) if higher than the regular tax. BEAT
draft would restrict losses in one country from offsetting
does not allow tax credits except for some temporary
income in another and tighten the treatment of Subpart F
domestic credits (no foreign tax credits). S. 991 would
income, a regime that applies full taxation to certain easily
accelerate the tax rate increase and eliminate the temporary
shifted income.
domestic credits. The BBBA would increase the rate
(eventually to 18%), allow all credits, and add certain
Other Corporate Proposals
payments for goods sold. The President’s proposal would
The BBBA also contains some other corporate proposals
replace BEAT with a disallowance of deductions for
not related to international taxes, including imposing a 1%
payments to foreign entities in lower-tax jurisdictions. The
excise tax on share repurchases, imposing taxes in certain
Wyden, Brown, and Warner draft would add a higher tier of
types of reorganizations, and expanding the definition of
tax rates to the base erosion amounts and allow full
“trade or business” for determining common control of
domestic credits.
firms to include research and investment.
Anti-Inversion and Treaty-Shopping Rules
Donald J. Marples, Specialist in Public Finance
Under current law, firms that invert (move their
Jane G. Gravelle, Senior Specialist in Economic Policy
headquarters abroad) by merging with foreign firms are
treated as U.S. firms for tax purposes if the U.S.
IF11809
shareholders own more than 80% of the shares. There are
also penalties if shareholders own more than 60% of the
https://crsreports.congress.gov
Trends and Proposals for Corporate Tax Revenue
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF11809 · VERSION 8 · UPDATED
Updated December 17, 2021
Trends and Proposals for Corporate Tax Revenue
Since the mid-1960s, U.S. corporate tax revenues have
The Senate Finance Committee draft of the BBBA contains
declined, relative to the size of the economy. Corporate tax
similar provisions.
revenue as a percentage of gross domestic product (GDP),
which was 3.9% in 1965, has fallen to approximately 1.0%
Raising the Corporate Tax Rate
in 2020. The decline in corporate tax revenue since 1965 is
The corporate tax rate is currently 21%, levied as a flat rate,
due to several factors. Average tax rates have declined,
reduced from a top marginal rate of 35% before 2018 by the
primarily due to reductions in the statutory rate and changes
2017 tax law commonly known as the “Tax Cuts and Jobs
in depreciation. The corporate tax base has also been
Act” (TCJA; P.L. 115-97). President Biden has proposed an
reduced through declining profitability (return on assets),
increase to 28% with a revenue gain of $858 billion for
increased use of the pass-through organizational form for
FY2022-FY2031. Senator Sanders has proposed (S. 991) a
businesses, and international profit shifting.
graduated corporate rate with most corporate income taxed
at 35%. President Biden has also proposed an alternative
Whereas U.S. corporate tax revenue has decreased,
minimum tax based on financial or “book” income for
corporate tax revenue in other Organization for Economic
corporations with more than $2 billion in earnings. The
Co-operation and Development (OECD) member countries
BBBA would impose a minimum tax of 15% on firms with
has, on average, increased. Since 1965, average corporate
$1 billion or more in earnings. Senator Warren’s proposal
tax revenue collected by OECD countries has increased
(S. 2680) would impose a minimum tax on corporations
from 2.1% of GDP to 3.1% of GDP in 2018 (see Figure 1).
with over $100 million in earnings.
Figure 1. Corporate Tax Revenue, as a Percentage of
GDP, 1965-2018
Increasing the Minimum Tax on Foreign Source
Income (GILTI)
Several bills in the 117th Congress, including S. 20
(Klobuchar), S. 714 (Whitehouse), H.R. 1785 (Doggett), S.
991 (Sanders), and the BBBA would increase the minimum
tax on foreign source income, known as the tax on Global
Intangible Low Taxed Income or GILTI, enacted in 2017.
(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
Source: OECD Tax on Corporate Profits, https://data.oecd.org/tax/
21%, leading to a tax rate of 10.5% (13.125% after 2025).
tax-on-corporate-profits.htm, downloaded March 31, 2021.
Foreign oil extraction income is excluded and not subject to
Note: Tax on corporate profits includes taxes levied by all levels of
any U.S. tax.
government.
Current law allows credits for foreign taxes paid; the credits
Figure 1 also shows that the United States collected 1.8
are limited to U.S. taxes due on foreign-source income, but
times as much corporate tax revenue compared to the
are imposed on an overall basis across countries. This
OECD average in 1965. Since 1981, however, U.S.
treatment allows for the use of credited taxes paid in high-
corporate tax revenue as a percentage of GDP has been less
tax countries to offset U.S. income tax due in low-tax
than the OECD average (which includes the United States).
countries. For GILTI, the credit is limited to 80% of foreign
In 2018, OECD average corporate tax revenue as a
taxes paid.
percentage of GDP was 3.1 times U.S. corporate tax
The Biden Administration’s budget and four bills in the
revenue as a percentage of GDP.
117th Congress—S. 20, S. 714, H.R. 1785, and S. 991—
Corporate Tax Proposals
would eliminate the deemed deduction for tangible assets
and tax GILTI at 21% (35% in S. 991). The BBBA would
President Biden’s budget proposes an increase in the
amount of revenue raised by the corporate tax system by
reduce the deemed deduction to 5% and tax GILTI at
15.051%. In all of the proposals, the foreign tax credit
about $2 trillion over the next 10 years. Several legislative
would be limited by country, and most proposals would
proposals would increase corporate taxes, in most cases by
altering the international tax structure. The House-passed
increase the GILTI credit to 100% (95% in the BBBA).
Foreign oil extraction income is included in GILTI in both
Build Back Better Act (BBBA; H.R. 5376) would raise
BBBA and the Administration proposal..
around $800 billion in corporate taxes in FY2022-FY2031.
https://crsreports.congress.gov
Trends and Proposals for Corporate Tax Revenue
These proposals appear to be motivated, in part, by
shares. The President’s proposal, S. 991, S. 714, and H.R.
concerns that the exemption for tangible income might
1785, as well as two more narrowly focused bills, S. 1501
encourage the movement of investment abroad.
(Durbin) and H.R. 2976 (Doggett), would treat these new
firms as U.S. firms if the U.S. shareholders have more than
Repeal of Deduction for Foreign-Derived Intangible
50% ownership or if they are managed in the United States.
Income
The Senate Finance Committee draft of the BBBA would
In 2017, the TCJA created the foreign-derived intangible
treat inverted firms as U.S. firms if U.S. shareholders own
income (FDII) deduction, aimed at equalizing the treatment
65% of the firm and replace the 60% level with 50%. S. 991
of intangibles located abroad and in the United States. FDII
would also tighten the rules affecting treaty shopping
is based on a firm’s share of exports and a deemed
(going through a country that has a treaty with the United
deduction for 10% of tangible income, with the remaining
States). See CRS Report R40468, Tax Treaty Legislation in
income allowed a deduction of 37.5% (21.875% after
the 111th Congress: Explanation and Economic Analysis,
2025), leading to a tax rate of 13.125% (16.4% after 2025).
by Donald J. Marples for an explanation of the treaty-
S. 714, H.R. 1785, S. 991, and the Biden Administration
shopping issue.
proposal would eliminate FDII. The BBBA would tax FDII
at 20.7%. The Biden proposal would use the revenue to
Dual Capacity Shareholder
provide additional incentives for research. As with GILTI,
S. 991, S. 725, H.R. 1786, and the BBBA would restrict
one motivation for these proposals is due to concerns that
foreign tax credits for taxes paid where an income tax is
the deduction for tangible assets might discourage
paid in part to receive a benefit (i.e., the firm is paying a tax
investment in the United States.
in a dual capacity) to the amount that would be paid if the
taxpayer were not a dual-capacity taxpayer. This provision
Limit Interest Expense Deduction for
typically relates to taxes being substituted for royalties in
Multinationals
oil-producing countries.
S. 714, H.R. 1785, S. 991, the BBBA, and the
Administration propose to allocate interest deductions
Other International Provisions
among countries based on their share of income. This
S. 725, H.R. 1786, S. 991, and the BBBA would address
provision is aimed at preventing firms from allocating
other areas of international corporate taxation. Other
interest deductions to the United States and out of low-
sections of S. 725 and H.R. 1786 are associated with
taxed countries. The Senate Finance Committee draft of the
international tax administration and enforcement. The
BBBA provides an election to allocate on the basis of
BBBA also contains other international provisions,
assets.
including limiting the deduction for foreign dividends for
U.S. shareholders with a 10% ownership to dividends from
Modifying the Base Erosion and Anti-Abuse Tax
controlled foreign corporations (CFCs) and making changes
The base erosion and anti-abuse tax (BEAT), enacted in
to limit certain “downward attribution” rules that create
2017, requires corporations to add certain payments
CFC status for some foreign-related firms and subject them
between related foreign firms and then taxes them at a 10%
to GILTI. The BBBA and the Wyden, Brown, and Warner
rate (12.5% after 2025) if higher than the regular tax. BEAT
draft would restrict losses in one country from offsetting
does not allow tax credits except for some temporary
income in another and tighten the treatment of Subpart F
domestic credits (no foreign tax credits). S. 991 would
income, a regime that applies full taxation to certain easily
accelerate the tax rate increase and eliminate the temporary
shifted income.
domestic credits. The BBBA would increase the rate
(eventually to 18%), allow all credits, and add certain
Other Corporate Proposals
payments for goods sold. The President’s proposal would
The BBBA also contains some other corporate proposals
replace BEAT with a disallowance of deductions for
not related to international taxes, including imposing a 1%
payments to foreign entities in lower-tax jurisdictions. The
excise tax on share repurchases, imposing taxes in certain
Wyden, Brown, and Warner draft would add a higher tier of
types of reorganizations, and expanding the definition of
tax rates to the base erosion amounts and allow full
“trade or business” for determining common control of
domestic credits.
firms to include research and investment.
Anti-Inversion and Treaty-Shopping Rules
Donald J. Marples, Specialist in Public Finance
Under current law, firms that invert (move their
Jane G. Gravelle, Senior Specialist in Economic Policy
headquarters abroad) by merging with foreign firms are
treated as U.S. firms for tax purposes if the U.S.
IF11809
shareholders own more than 80% of the shares. There are
also penalties if shareholders own more than 60% of the
https://crsreports.congress.gov
Trends and Proposals for Corporate Tax Revenue
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF11809 · VERSION 8 · UPDATED