Tuesday, April 13, 2021

Corporate Income Taxes 1960 to 2020

Because we are about to embark on a discussion about corporate taxes in this country, I thought I would dig into some historical data. I easily found comparative government budget data for the US starting in 1962 -- this covers 10 presidents and 58 years. 

I am not looking at amounts paid by any particular firms -- instead the total of all of them. The IRS table I found gives a number for each year as to how much the Federal government collected in corporate income taxes as a percentage of Gross Domestic Product. 

Corporations pay more than just federal corporate income taxes -- they pay excise taxes and a pretty good chunk called payroll taxes. In 2020, for example, companies paid 1% of GDP in corporate income taxes. They paid another 0.4% of GDP in excise taxes and 6.2% of GDP in payroll taxes. 

I decided to report the corporate income tax results over time by President. But I didn't attribute corporate income taxes to exactly their terms because it takes a little while to get an administration going and impacts often linger after a term. So I decided to attribute to each president the taxes raised starting in the second year of the administration through the first year of the next president's term. 

For example, Clinton's term started in 1993 but I gave that year to Bush I. Clinton's term ended in 2001 but I gave taxes in 2002 to Clinton (not Bush II).  

The table below contains the corporate income taxes collected by each president -- the percentage in his second year, the highest/lowest percentage in the mid years, followed by the percentage in the first year of the following president. 

One note -- these are not legislated tax rates. We don't know from this data whether tax rates were raised or lowered. We don't know what changes were made to the tax code. We are getting the combined impact of all those things. Did taxes (as a percentage of real GDP) go up, down, or stay the same? 

The last column contains recession years of each president's term. We know that during recessions tax revenues decline so we should point out those years when looking at the tax revenue data. 

How do we read the table? 

LBJ is the first line. In his second year the tax to real GDP ratio was 3.6%. The rate peaked at 4.1% during his term but then ended up at 3.7%. Comparing LBJ to other presidents, his corporate taxes are high but they did not rise very much from beginning to end of term. 

Reagan finished with  higher taxes despite a large decrease during his term. Ford had a similar pattern.

Clinton and Bush II did the opposite with taxes rising and then falling. The recession at the end of both their terms might explain the decline in taxes. 

Obama's taxes showed a similar pattern -- rising then falling -- but there were no recessions in Obama's years. 

Trump's numbers are pretty interesting in that they don't change much. Taxes start low and stay low. His rates are definitely lower than Obama's but we see no pattern of falling tax revenues during his years. He and Reagan are reputed to be great tax cutters and maybe they made changes -- but the end result is that tax revenues as a percent of real GDP did not fall for either of them. 

The last line will be for Joe Biden. Given all this history, what's the possibility that after all the hooting and hollering, he is going to raise a ton of money for his spending plans? 

Clinton raised taxes above those of Bush I but a recession quashed his plan. Obama raised some revenue above Bush II but he benefited by the end of a recession raising tax revenues. 

Trump's very low numbers suggest that Biden might have some room to raise taxes but we will have to wait and see. History is not in his favor. We do not see taxes jumping from the end of one President to the next one (except for small ones for Clinton and Obama). 

                     Start High/ End   Recession years                

LBJ               3.6    4.1   3.7    None

Nixon            3.1    2.4   2.7    69/70

Ford              2.5    2.3   2.7     73/75  

Carter            2.6    2.3   2.0     80/81

Reagan          1.5    1.0   1.9     81/82

Bush I            1.6   1.6    1.7     90/91

Clinton           2.0   2.2    1.4    00

Bush II           1.4   2.6    1.0    07/08/09

Obama           1.3   1.9    1.5    None

Trump            1.0   1.1    1.0   20

Joe Biden        ?       ?       ?      ?

   



2 comments:

  1. Dear LSD. Not shure wut you want followerz to take away from yer data so I googl’d “total US tax revenue” and found a graph and $$ going back to the 50s. Why? Kuz this Tuna’s mindless inquiring mind wanted to know $$ as well as % that might better inform my ‘take away.’ I offer the following as nuance to yer comment on Biden. The main sources of U.S. tax revenue from highest to lowest as % of GDP are: personal income, Soc. Sec. payroll, corporate, other, and excise. Since the 50s personal income tax has been increasing as a % of GDP (though staying about 8%) while corporate income tax has been decreasing—corp decreasing more than personal (corp’s high wuz 6% in the 50s now less than 2%). Soc. Sec. payroll tax (which corps also pay as you say) has also been increasing. Excise tax (paid by corps) has been decreasing (high about 3% in 50s to about 1% now). To say that Sleepy, Creepy, Hiding, Lying Biden has some room to raise taxes—based on a % of GDP—should be (RE)considered in light of the fact that (1) corp income tax has been decreasing since the 50s—not a recent phenom (2) payroll taxes (which corps pay) have been increasing, and (3) total income tax revenue has increased every year since 2010: It increased from $2.16 trillion in ’10 to $3.86 trillion (est.) in ’21—almost an 80% increase. I don’t see justification to increase corp income tax based on a % of GDP when total revenue has been increasing. We don’t have a revenue problem we have a spend’n problem.

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    1. Thanks Tuna. My table does not suggest anything for Biden. Looking at % of GDP for 60 years shows a lot of ups and downs. For example, it was 1.2% in 2003, rose to 2.6% and then was back down to 1% in 2009. Yes, we have a spending problem.

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