The House and Senate have developed legislation creating new corporate tax breaks to offset the repeal of export tax subsidies that are in violation of World Trade Organization agreements. However, the new corporate tax breaks would be far more costly than the $50 billion in revenues over ten years that would be raised as a result of the repeal of these export subsidies.
A common misconception perpetuated by Congressional Republicans is that federal corporate tax rates are very high, producing economic inefficiencies and stifling economic growth. But in fact, corporate taxes in the United States are very low, from both an historical and an international perspective.
Federal corporate income taxes are historically low, whether measured as a share of total federal tax revenues or as a share of gross domestic product (GDP). In 1962, corporate taxes made up over 20 percent of total federal revenues and equaled 3.6 percent of GDP. The Congressional Budget Office estimates that in 2003 corporate taxes will account for only 7.4 percent of total federal tax revenues, and equal only 1.2 percent of GDP. Since World War II, the only year in which corporate taxes were lower than they are today was 1983.
Taxes on U.S. corporations are also low compared with other major industrialized countries. In 2002, corporate taxes (at all levels of government) as a share of GDP were only 2.5 percent in the United States, compared with an average of 3.6 percent across all Organization for Economic Cooperation and Development countries. This international corporate tax gap has widened over the past few decades, especially most recently as a result of the federal corporate tax cuts passed since 2000.
