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1 1 (October 13, 2021)

handle is hein.crs/govegcw0001 and id is 1 raw text is: Trends and Proposals for Corporate Tax Revenue Since the mid-1960s, U.S. corporate taxrevenues have declined, relative to the size of the economy. Corporate tax revenue as a percentage of gross domestic product (GDP), which was 3.9% in 1965, has fallen to approximately 1.0% in 2020. The decline in corporate taxrevenue since 1965 is due to several factors. Averagetaxrates have declined, primarily due to reductions in the statutory rate and changes in depreciation. The corporate taxbase has also been reduced through declining profitability (return on assets), increaseduse of the pass-through organizationalformfor businesses, and internationalprofit shifting. Whereas U.S. corporate taxrevenue has decreased, corporate taxrevenue in other Organization for Economic Co-operation and Development (OECD) member countries has, on average, increased. Since 1965, average corporate taxrevenue collectedby OECD countries has increased from2.1% of GDP to 3.1% of GDP in 2018 (see Figure 1). Figure 1. Corporate Tax Revenue, as a Percentage of GDP, 1965-2018 5 25 22 Source: OECD Tax on Corporate Profits, https://data.oecd.org/tax/ tax-on-corporate-profits.htm, downloaded March 31,2021. Note: Tax on corporate profits includes taxes levied by all levels of govern ment. Figure 1 also shows that the United States collected 1.8 times as much corporate taxrevenue comparedto the OECD average in 1965. Since 1981, however, U.S. corporate taxrevenue as a percentage ofGDP has been les s than the OECD average (which includes the United States). In 2018, OECD average corporatetaxrevenueas a percentage of GDP was 3.1 times U.S. corporate tax revenue as a percentage of GDP. Corporate Tax Proposas President Biden's budget proposes an increase in the amount ofrevenue raised by the corporate taxsystemby about $2 trillion over the next 10 years. Several legislative proposals would increase corporate taxes, in most cases by altering the international taxstructure. The Ways and Means Committee recommendations in the Build Back Better Act (BBBA; H.R. 5376) would rais e around $1 trillion in corporate taxes in FY2022-FY2031. Raising the Corporate Tax Rate The corporate taxrate is currently 21%, levied as a flat rate, reduced froma top marginalrate of 35% before 2018 by the 2017 tax law commonly known as the TaxCuts and Jobs Act (TCJA; P.L. 115-97). President Biden has proposed an increase to 28% with a revenue gain of $858 billion for FY2022-FY2031. Senator Sanders has proposed (S.991) a graduated corporate rate with most corporate income taxed at 35%. The BBBA would raise the rate to 26.5%. President Biden has also proposedan alternative minimumtaxbased on financial or book income for corporations with more than $2 billion in earnings. Senator Warren's proposal (S. 2680) would impose a minimum tax on corporations with over$100 million in earnings. Increasing the Minimum Tax on Foreign Source income (G-ILT) Severalbills 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 taxon foreign source income, known as the taxon Global Intangible Low Taxed Income or GILTI, enacted in 2017. (See CRS Report R45186, Issues in International Corporate Taxation: The 201 ZRevision (P.L. 115-97), by Jane G. Gravelle and Donald J. Marples for a discussion of international taxrules.) Under currentlaw, 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%, leading to ataxrate of 10.5% (13.125% after 2025). Foreign oilextraction income is excluded and not subject to any U.S. tax. Current law allows credits for foreign taxes paid; the credits are limited to U.S. taxes due on foreign-source income, but are imposed on an overallbasis across countries. This treatment allows for the use of credited taxes paid in high- taxcountries to offset U.S. income taxdue in low-tax countries. For GILTI, the credit is limited to 80% of foreign taxes paid. The Biden Administration's budget and fourbills in the 117th Congress-S. 20, S. 714, H.R. 1785, and S. 991- would eliminate the deemed deduction for tangible assets and taxGILTI at 21% (35% in S. 991). The BBBA would reduce the deemed deduction to 5% and taxGILTI at 16.5265%. In all of the proposals, the foreigntaxcredit would be limited by country, and most proposals would increase the GILTI credit to 100% (95% in the BBBA). Foreign oilextraction income is included in GILTI in both BBBA and the Administration proposal. Updated October 13,2021

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