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Why Have Corporate Tax Revenues Declined? Another Look

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  • Alan J. Auerbach

Abstract

As a share of GDP, U.S. federal tax revenues from nonfinancial corporations have held relatively constant since the early 1980s, after falling precipitously during the late 1960s and the 1970s. But this relative constancy masks offsetting trends in the ratio of nonfinancial C corporation profits to GDP (declining) and the average tax rate on these profits (increasing). The average tax rate rose steadily between 1996 and 2003, an increase largely attributable to an unprecedented rise in the importance of tax losses. This rise casts some doubt on the importance of tax planning activities as a vehicle for reducing corporate taxes. So, too, does the relative stability of the rate of profit (relative to net assets), which might be expected to have declined had the understatement of profits for tax purposes been increasing.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12463.

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Date of creation: Aug 2006
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Publication status: published as Auerbach, Alan. "“Why Have Corporate Tax Revenues Declined? Another Look," CESifo Economic Studies (June 2007): 153–-171.
Handle: RePEc:nbr:nberwo:12463

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  1. Mihir A. Desai, 2003. "The Divergence between Book Income and Tax Income," NBER Chapters, National Bureau of Economic Research, Inc, in: Tax Policy and the Economy, Volume 17, pages 169-208 National Bureau of Economic Research, Inc.
  2. Graham, John R., 1999. "Do personal taxes affect corporate financing decisions?," Journal of Public Economics, Elsevier, Elsevier, vol. 73(2), pages 147-185, August.
  3. Diego Comin & Thomas Philippon, 2005. "The Rise in Firm-Level Volatility: Causes and Consequences," NBER Working Papers, National Bureau of Economic Research, Inc 11388, National Bureau of Economic Research, Inc.
  4. Alan J. Auerbach, 2005. "Who Bears the Corporate Tax? A review of What We Know," NBER Working Papers, National Bureau of Economic Research, Inc 11686, National Bureau of Economic Research, Inc.
  5. Alan J. Auerbach & James M. Poterba, 1986. "Why Have Corporate Tax Revenues Declined?," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 435, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
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