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Home Publications Blogs Beat the Press Post Chart on Corporate Taxes as a Share of GDP is Deceptive

Post Chart on Corporate Taxes as a Share of GDP is Deceptive

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Friday, 26 July 2013 05:38

The Post had a chart showing that corporate income taxes have risen as a share of GDP across the OECD over the last 45 years. This is somewhat misleading. The chart is showing an unweighted average. This means that the sharp rise in the tax share in Norway would have the same weight as the sharp decline in the tax share of GDP in the United States. As a practical matter, the OECD data shows sharp declines in the corporate tax share of total tax revenue in most of the large countries.

For example, in the United States corporate income taxes as a share of GDP dropped from 4.1 percent in 1965 to 2.7 percent in 2010. In Japan the share declined from 4.0 percent to 3.2 percent. In Germany the drop was from 2.5 percent to 1.5 percent. In Canada corporate income taxes declined as a share of GDP from 3.8 percent in 1965 to 3.3 percent in 2010. In the United Kingdom there was a rise over this period from 1.3 percent of GDP to 3.1 percent, but the latter is down sharply from a 4.7 percent share of corporate income taxes in GDP in 1985, so there has not been an upward trend there either.

For those interested, here is the long-term picture in the United States.

btp-2013-07-26

Note: Spelling errors corrected from earlier version.

Comments (4)Add Comment
typo
written by david s, July 26, 2013 9:29
"term" is spelled wrong. You're still better than the Post when it comes to errors.
...
written by skeptonomist, July 26, 2013 9:35
The bump after about 2004 represents the huge increase in corporate profits, not any change in tax rates. Profits recovered very quickly after 2009 while GDP increased only slowly, so I would expect the tax/GDP ratio to be pretty high now, maybe over 3%, but this would be a result of the increasing share of the economy going to corporations, not increase in rates.
why should there be any corporate taxes.
written by pete, July 27, 2013 4:07
E.g., as skepto says, corporations are getting an increased share of GDP. Thus, pension funds, IRAs, etc., invested in corporations are growing. So, you could take the money now, with increased corporate taxes, and reduce pensions effectively. Or you can let pensioners receive the income and pay taxes on the income. Similarly, dividends have risen lately, and they are taxed at 15%. So taxing corporations and then taxing dividends is really double dipping, and a disincentive to investing. We already have low growth. Shouldn't we be encouraging investment?

Tax bad things like carbon and sugar and french fries, not labor income or legitimate corporate income.
double taxation
written by saurabh, July 29, 2013 2:01
pete, this Tom the Dancing Bug comic really explains it best:

http://www.gocomics.com/tomthedancingbug/2003/03/08/

Corporations can't simultaneously cry about how they're people and deserve free speech rights and then whine about how they shouldn't be taxed because theirs is not "real" income.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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