Corporate tax collection headed for another record high
Corporate tax revenue is 22% higher than last year's record level: CBO
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Federal tax receipts likely surged to another record high this year, reflecting a booming economy and huge growth in corporate profits amid red-hot inflation.
The Tax Foundation, a non-partisan think tank, said in a new analysis that it's possible corporate tax revenue will go higher – "possibly much higher" – than it did in fiscal year 2021, when the government raked in a record $372 billion.
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That's because the Congressional Budget Office's most recent monthly budget review showed that in the first six months of the fiscal year (October through March), corporate tax revenue was 22% higher than last year's record level. If this pattern continues to hold for the remainder of the year, corporate tax revenue is in line to hit $454 billion.
This April 13, 2014, file photo shows the Internal Revenue Service (IRS) headquarters building in Washington. (AP / AP Newsroom)
"Undoubtedly, inflation has contributed to this year’s boost in corporate tax receipts," the analysis, written by Tax Foundation economist William McBride, said. "However, even as a share of GDP, which also grows with inflation, corporate tax revenue this year is on track to reach its highest level since 2015."
The strong corporate tax receipts last year reflected a rapidly recovering economy and huge growth in profits that year; S&P 500 profits, for instance, grew 39%. Although analysts expect slower growth this year, they are still forecasting substantial growth in S&P 500 profits of about 10%, "which, to the extent it materializes, also points to record-high corporate tax revenue," McBride wrote.
Inflation and the recovering economy have also boosted other sources of revenue for the federal government, according to the Tax Foundation: Individual income tax receipts rose to an all-time high of $2.04 trillion in fiscal year 2021. Receipts are currently running 36% higher in fiscal year 2022.
WASHINGTON, DC - JUNE 08: Internal Revenue Service (IRS) Commissioner Charles Rettig testifies during a Senate Finance Committee hearing June 8, 2021 on Capitol Hill in Washington, D.C. (Photo by Tom Williams-Pool/Getty Images / Getty Images)
At the same time, total federal tax collections, including payroll and other taxes hit an all-time high in nominal terms of $4.05 trillion in fiscal year 2021, or about 18.1% of the nation's GDP. That was well above the long-run average of 17.1% before Republicans passed the 2017 Tax Cuts and Jobs Act, which slashed the corporate tax rate to 21% from 35% and temporarily lowered the top individual income tax rate to 35% from 39.6%.
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Total collections are running about 25% higher in fiscal year 2022.
"If that pattern holds, total federal tax collections will hit $5.04 trillion in fiscal year 2022, or 21.0 percent of GDP—a new all-time high in both nominal terms and as a share of GDP," McBride said.