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CESifo Economic Studies Advance Access originally published online on May 22, 2007
CESifo Economic Studies 2007 53(2):153-171; doi:10.1093/cesifo/ifm008
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Right arrow G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
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© The Author 2007. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Why Have Corporate Tax Revenues Declined? Another Look

Alan J. Auerbach*

The relative constancy of non-financial corporate tax revenues as a share of US GDP masks offsetting trends in the ratio of corporate profits to GDP (declining) and the average tax rate (increasing). The average tax rate rose steadily between 1996 and 2003, an increase largely attributable to the importance of tax losses. This rise casts some doubt on the role of tax planning activities in reducing corporate taxes. So, too, does the relative stability of the rate of profit (relative to net assets), which might be expected to have declined had the understatement of profits for tax purposes been increasing. (JEL code: H25, G32)

Key Words: Corporate profits • tax shelters • tax losses


* Department of Economics, University of California, 549 Evans Hall, Berkeley, CA 94720-3880, USA, e-mail: auerbach{at}econ.berkeley.edu


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