U.s. Corporate Tax Revenues Essays
Unlike many other developed countries, U.S. federal government relies heavily on individual income tax revenue. This is rather different from other OECD countries in terms of the structure of tax revenues. As Exhibit 2 shows, taxes raised from individuals accounts for 46.5% of the entire tax revenue, whereas the average OECD individual taxes accounts for only 24.5%. Although U.S. corporate tax rate is the highest among developed countries, corporate tax revenue only accounts for approximately 10.8% of the total revenue. Corporate tax revenue used to be a significant source (32.1%) of governmental income, but the percentage has dropped notably nowadays.
U.S. corporate taxation is known as the “double taxation”, meaning the corporations pay income taxes at the entity level and the shareholders pay dividend income taxes at the individual level. The percentage of corporate tax revenue has not changed dramatically for the past 15 years. The percentage fluctuated between 7% and 14% according to Exhibit 1. However, comparing the percentage from 1952, the corporate tax revenue dropped significantly from 32.1% of the total revenue. What factors contribute to this change?
In order to avoid double taxation, C corporation is no longer a popular choice nowadays for new businesses. There is an increasing number of pass-through entities as Exhibit 3 demonstrates. Pass-through entities, such as partnerships and S Corporations do not pay income taxes at the…