February 3, 2012 - According to the Congressional Budget Office (CBO) report released on Tuesday, the overall corporate tax rate (corporate receipts as a percentage of domestic economic profits) in 2011 dipped to 12.1 percent, an all-time low over the 40 years for which CBO has tracked this data, and less than half the historic average of 25.6 percent. As the Wall Street Journals notes, this is even as corporate profits are on the rise.
The CBO notes that the "unusually low levels" of corporate taxes were not only driven by the recession, but also by tax breaks, such as those allowing for special deductions for depreciation in the value of equipment. This reinforces the critical point that Citizens for Tax Justice has been making that although the US has one of the highest statutory corporate tax rates, a wide variety of tax breaks cause the US to actually have the second lowesteffective corporate tax rate in the developed world.
Looking forward, the CBO projects that the corporate tax rate will rebound substantially over the next few years and return to near its average historic rate. Unfortunately, this projected rebound may not come to fruition as it assumes that lawmakers will actually allow the expiration of corporate tax breaks. Unfortunately, extension of unnecessary corporate tax breaks, such as the allowance of 100 percent bonus depreciation, is one of the few areas where the Republican leadership and the Obama Administration agree.
Although Congress should be more proactive in raising corporate taxes, the CBO report reveals yet another area where Congress could improve the situation by doing nothing — and allowing tax cuts to expire. Of course, that would require lawmakers to overcome the billions spent by corporations to protect these tax breaks.
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