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1 Paul G. Merski, The Corporate Tax Burden 1 (1990)

handle is hein.taxfoundation/srbcgxz0001 and id is 1 raw text is: TAX FOUNDATION'S JAN The Corporate Tax Burden by Paul G. Merski UARY 1990 With federal deficits hovering around $150 billion, the government will con- tinue its drive for more revenues. Corpo- rations are often targeted because they are said to be undertaxed. Despite statis- tical evidence to the contrary, this recur- ring theme seems to have a life of its own and always resurfaces when more reve- Table I Impact of Major Tax Legislation, Enacted 1981-1988a, on Individual and Corporate Income Tax Receipts Fiscal Years 1988-1992 ($Billions) Income Tax 1988 1989 1990 1991 1992 Individual $ -201.4 $ -237.6 $ -259.4 $ -288.4 $ -326.9 Corporate +24.0 +27.2 +33.7 +42.6 +43.7 a Budget effect revenue estimates are prepared bythe Office of Management and Budget. They measure only the direct effect of tax legislative changes on receipts with feedback effect limited to the overall Income forecast and its impact on receipts by major source. Source: Budget of the U.S. Government, FY 1990 nues are required for increased spend- ing. In fact, corporations carry a heavy tax burden and provide a large and grow- ing percentage of the total tax revenue collected by the federal government. Recent Corporate Tax History In 1981, Congress enacted a signifi- cant corporate tax cut under the Eco- nomic Recovery Tax Outside of the Tax Reform Act of Act of 1981 (ERTA). 1986, the major drive behind tax If it had been allowed to take effect fully, it legislation after 1981 was purely would have substan- and simply to increase tax tially reduced over- revenues. all corporate income tax liabilities in the 1980s. Instead, there were major contra- vening tax bills starting with the Tax Equity and Fiscal Responsibility Act (TEFRA) in 1982 and the Deficit Reduc- tion Act (DEFRA) in 1984. Outside of the Tax Reform Act of 1986, the major drive behind tax legislation after 1981 was purely and simply to increase tax reve- nues. The Tax Reform Act of 1986 obliter- ated the capital recovery and business tax relief of 1981 and effectively piled on significant net increases in corporate tax Table II Federal Corporate Income Tax Receipts Selected Fiscal Years 1950-1990 Federal Corporate % of Total Income Federal Tax Receipts Income Tax Year ($Billions) Receipts 1950 $10.4 39.9% 1955 17.9 38.3 1960 21.5 34.6 1965 25.5 34.3 1970 32.8 26.6 1971 26.8 23.7 1972 32.2 25.3 1973 36.2 25.9 1974 38.6 24.5 1975 40.6 24.9 1976 41.4 23.9 1977 54.9 25.8 1978 60.0 24.9 1979 65.7 23.2 1980 64.6 20.9 1981 61.1 17.6 1982 49.2 14.2 1983 37.0 11.4 1984 56.9 16.1 1985 61.3 15.5 1986 63.1 15.3 1987 83.9 17.6 1988 94.5 19.1 1989 106.9 (e) 21.6 1990 117.4 (e) 23.7 Source: Economic Report of The President, various years. (e) estimate liabilities after 1986. More recently, fur- ther increases in corporate income taxes have occurred as a result of the Omnibus Paul Merski is Director of Fiscal Affairs at the Tax Foundation. II

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