The actual tax rate for corporate income in the United States has now dropped to its lowest level in decades, and this dwindling source of government revenue is causing concern among some policy experts.
According to a recent report released by the progressive think tank “Tax and Economic Policy Institute” (Institute on Taxation and Economic Policy, referred to as ITEP), last year more than 700 profitable companies paid 10.4% in current federal income tax, which is less than half of the statutory federal corporate income tax rate of 21%. The report states that over 250 of these companies paid an actual tax rate of less than 7%, and 114 companies, including Tesla, Walt Disney, United Airlines, and DoorDash, did not pay any current federal income tax at all.
ITEP indicates that these tax rates are derived from the analysis of annual financial reports submitted to the U.S. Securities and Exchange Commission, rather than the IRS data; the latter is usually lagging behind the SEC filings.
Data released earlier this month by the U.S. Treasury Department shows that during the Trump administration, corporate tax revenues declined significantly. The administration introduced a series of tax incentives aimed at promoting capital investment, yet corporate profits continued to soar. The data indicates that for the fiscal year ending September 30, U.S. corporate income tax revenues fell by about 15%, amounting to a reduction of approximately $70 billion to $381 billion. Compared to 2024, during the tenure of former President Joe Biden, the cumulative decline in corporate tax revenues has exceeded 25%.
Some policy experts worry that a decline in corporate tax revenues will exacerbate the U.S. federal deficit and affect the government's ability to raise funds. The Office of Management and Budget (OMB) of the U.S. Congress estimates that Trump's "Great American Deal" ( One Big Beautiful Bill Act, OBBBA) will increase the federal deficit by $3.4 trillion over the next decade, due to a reduction in revenues of $4.5 trillion while expenditures will only decrease by $1.1 trillion. Meanwhile, in the past 12 months up to mid-2026, U.S. corporate profits have risen to a record $4.7 trillion, an increase of 17% compared to the previous 12 months.
However, Matt Gardner ( Matt Gardner ), a senior researcher at ITEP and co-author of the report, stated that rather than targeting the more than 100 companies that do not pay federal income tax, it is the hundreds of companies that pay lower tax rates that pose a greater threat to tax revenue.
Gardner told Fortune magazine: “Profits are highly concentrated at the top, and when these companies pay tax rates of less than 21%, that is where the real gaps in our corporate tax law are being exploited. Their profits are so substantial that their tax avoidance practices have a greater impact on the federal government’s ability to function than those of companies that pay zero taxes.”
Companies that take advantage of corporate tax reductions
Corporate tax reduction measures have been in place for decades, but Trump took steps to cut these taxes during both of his terms. In 2018, he reduced the federal corporate tax rate from 35% to 21%. The OBBBA passed last July extended the 21% tax rate and made several tax reductions permanent, while also adding new incentives, including the immediate expensing of domestic research and development expenses, as well as a 100% bonus depreciation for qualified business property purchased after January 2025.
Gardner pointed out that these two incentives are the most frequently utilized by companies. According to the report, the four companies that received the largest tax reductions – Alphabet, Microsoft, Amazon, and Meta – saved a total of $46 billion through these two policies and used this savings to fund the construction of large-scale artificial intelligence infrastructure.
Meta is particularly under scrutiny regarding how it takes advantage of research and development tax incentives. According to reports cited by the senators, the technology company is said to have classified its AI data centers as experimental "pilot models," thereby qualifying for such tax benefits. Senators Ron Wyden (Ron Wyden, Democratic Party of Oregon), Sheldon Whitehouse (Sheldon Whitehouse, Democratic Party of Rhode Island), Elizabeth Warren (Elizabeth Warren, Democratic Party of Massachusetts), Katherine Cortez Masto (Catherine Cortez Masto, Democratic Party of Nevada), Maggie Hassan (Maggie Hassan, Democratic Party of New Hampshire), Ben Ray Lujan (Ben Ray Luj, Democratic Party of New Mexico), and Peter Welch (Peter Welch, Democratic Party of Vermont) wrote to Meta CEO Mark Zuckerberg earlier this month, requesting an explanation by October 31 regarding the differences between the investments claimed to be eligible for tax reductions and the regular costs of equipping data centers.
These senators wrote: "Federal research and development tax credits can become a useful and necessary tool to support our country's innovative economy and cutting-edge research. Subsidizing the construction of your AI data centers falls far short of this standard."
Meta indicates that the company is one of the largest investors in research and development in the United States, having invested over $200 billion in the past five years, with just $57 billion invested last year alone.
A spokesperson for Meta told Fortune magazine: "Unlike traditional data centers, the optimization of AI data centers is essentially entirely new and requires a large amount of testing and experimentation, which cannot be accomplished through simulation to ensure that the design and construction are correct. This is precisely the type of domestic investment that Congress encouraged when it established these tax incentives decades ago."
Gardner expects that due to the permanent nature of the tax laws implemented by Trump, this trend of high reliance on depreciation and R&D bonuses will continue.
He said, "Unless the next Congress or the next president decides to reverse these policies, we have every reason to expect that this will become the new normal in the future."
Reasons Against Corporate Income Tax
One view that supports raising corporate taxes is that higher tax revenues can reduce deficits, thereby lowering interest rates, accelerating borrowing, and promoting subsequent growth. However, there are also other policy experts who oppose raising corporate taxes, arguing that a heavier tax burden will suppress investment, weaken the United States' competitiveness on the global stage, and ultimately harm economic growth opportunities.
Adam Mitchell, the Director of Tax Policy Research at the libertarian think tank Cato Institute ( Cato Institute ), stated in an article published in April ( Substack ) that since the introduction of the Economic Recovery Tax Act ( Economic Recovery Tax Act ) in 1981, research and development tax credits have enjoyed bipartisan support. This legislation, known as the " Kemp-Roth Tax Cut" due to Republican Representatives Jack Kemp ( Jack Kemp , New York State) and Senator William Roth ( William Roth , Delaware), was also part of an alliance established by then-President Ronald Reagan to gain the support of more conservative Democrats for his spending reduction plans.
He believes that depreciation tax incentives are conducive to economic growth because they reduce taxable income for the current period without decreasing the nominal amount of taxes paid, thereby providing companies with more opportunities for investment.
Michelle writes: "Tax reductions 'do not reveal any scandals.' They are a series of widely popular policies that enjoy bipartisan support. Companies that utilize these policies are acting in accordance with the intended meaning of the law, and usually have sufficient reasons to do so as well."
