Caroline L. Harris
Former Vice President, Tax Policy & Economic Development, Former Chief Tax Policy Counsel
Curtis Dubay Curtis Dubay
Chief Economist, U.S Chamber of Commerce


March 03, 2021


Since the early days of the 2020 election cycle, the President has stated that he “will require corporations… to finally pay their fair share.” As recently as last week, his spokesperson indicated that “[f]or permanent policies that incur ongoing costs, the president is committed to paying for them by asking… corporations to pay their fair share.”

Fairness is deeply ingrained in the human psyche, so it has resonance when politicians raise it. The problem for setting policy is fairness is in the eye of the beholder; it has no objective meaning that we can debate. What it really means when invoked as President Biden has raised it is “more” – he wants corporations to pay more. That is a fair position for a President to take, even if it would be better for our discourse if he said so directly. At least when we are clear he wants corporations to pay more, we have an objective standard to start from.

Before we dive in to what corporations pay now and whether they should pay more, we should point out that as one considers the concept of fairness, there exists a strong and widely accepted argument that corporations should not pay tax because doing so makes it harder for us to reach a fair distribution of the tax burden. That is because corporations do not bear the burden of the corporate tax. They cut the checks to the IRS, but the money comes out of the pockets of the corporations’ stakeholders. Those stakeholders are impacted in various ways – shareholders see lower returns on investment, workers see lower wages and fewer jobs, and customers see higher prices. When we tax at the corporate level, we obscure how the money is really coming from these groups. That’s not fair because obscuring where tax dollars are coming from makes it harder for us to determine who is paying how much of our tax burden.

It is particularly unfair because some studies find that the corporate tax falls heavily on workers, which results in suppressed wages. Other studies find it falls heavily on shareholders, who now make up a majority of Americans. These are retirees and those saving for retirement or other purposes. So, when President Biden or others want to raise taxes, they are in fact raising taxes on workers and Americans’ savings.

As it is, corporations pay huge amounts of tax – and remember that is already coming out of workers and retirement savers pockets. Earlier this month, the Congressional Budget Office put out its annual report on “The Budget and Economic Outlook” 2021 to 2031.” In 2020, corporate income taxes generated $212 billion in revenue; they are estimated to generate $393 billion by the year 2031. As a percentage of gross domestic product (GDP), in 2020, corporate income taxes were 1% of GDP, projected to rise to 1.3% of GDP by 2031. Historically, this is not far out of line with what corporations have paid. In the last decade they have averaged 1.5% of GDP. Since 1980, they have averaged 1.7%.

Even if recent trends are lower than the recent past, there is good reason. We recently lowered taxes for everyone – families, small businesses, and corporations. The reduction in the corporate tax rate was a vital part of tax reform because, prior to its enactment, U.S. corporations were getting slaughtered in the global market. The United States had the highest corporate tax rate among developed countries and essentially remained the only major developed country that still taxed our corporations on their foreign profit – exporting our high tax rate around the world. This was hurting American workers by suppressing job creation and wage growth. To get back to competitiveness and alleviate the pressure on workers, we had to reduce the corporate tax rate. There is strong evidence that the corporate cuts had the desired effect in the last few years. U.S. businesses were performing strongly in the years after tax reform, before the COVID-19 pandemic, and creating jobs a strong clip. Workers’ wages were also rising sharply before the pandemic, especially for the least-skilled workers.

Corporate taxes also were bound to fall in 2020 (and even in the next few years) because we are the midst of a global pandemic. COVID-19 wreaked havoc on the economy. While some businesses made more and will pay more in taxes this year, the overwhelming majority of businesses had basically no income, so they are not only going to owe less tax, they are going to get huge refunds on what they can carryback. That is how the system works. The year the global economy went into a freefall because of a pandemic is not the year to point to business receipts to make any point about tax policy. It's an anomaly – an all-time record anomaly. This outlier event will suppress corporate tax receipts for several years to come. Those favoring “a fair share” for corporations should not get away with citing the data in these years to support their argument for higher taxes. Further, as the economy works to recover, do we really want to threaten that recovery with a tax hike?

The reality is that while talking about “fair share” may seem like a good soundbite to some politicians, in these recent conversations, it’s simply a euphemism for raising taxes. And when the corporate tax rate is the tax you want to raise, the result is lower returns on investment for shareholders, lower wages and fewer jobs for workers, and higher prices for consumers. If that is what those in favor of “fair share” had in mind, perhaps they should be more direct and say that American workers, retirees, and investors need a tax hike during a global pandemic. It’s time we drop the fig leaf of “fair share” and focus on policies that drive economic recovery.

About the authors

Caroline L. Harris

Caroline Harris is former vice president, tax policy and economic development, and chief tax policy counsel at the U.S. Chamber of Commerce.

Curtis Dubay

Curtis Dubay

Curtis Dubay is Chief Economist, Economic Policy Division at the U.S. Chamber of Commerce. He heads the Chamber’s research on the U.S. and global economies.

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