What the tax is
The federal corporate income tax is paid by C corporations on their profits — revenue minus deductible costs such as wages, interest, depreciation, and certain investments. Pass-through businesses like S corporations, partnerships, and most LLCs do not pay it directly; their owners report business income on individual returns instead.
How the rate has changed
For decades, the United States used a graduated corporate rate structure topping out at 35 percent, one of the highest statutory rates among advanced economies. The 2017 Tax Cuts and Jobs Act replaced that structure with a flat 21 percent rate effective January 1, 2018. Many deductions, credits, and international tax rules were revised at the same time, so the effective rate that companies actually pay can differ from the statutory rate.
How much revenue it raises
The Congressional Budget Office projects federal corporate income tax receipts of roughly $500 billion in fiscal year 2024, or about 10 percent of total federal revenue. Individual income taxes and payroll taxes together account for the large majority of the rest. Corporate receipts tend to swing more than other revenue sources because corporate profits rise and fall with the business cycle.
The case for raising the rate
Supporters of a higher rate argue that profitable corporations should contribute more to funding federal programs and reducing deficits, particularly after years of record profits. They point to studies showing some large companies pay little or no federal income tax in certain years due to deductions and credits, and argue that a higher headline rate, combined with a broader base, would make the tax code more progressive.
The case against raising the rate
Critics argue that higher corporate taxes can reduce business investment, slow wage growth, and make U.S.-based companies less competitive against foreign rivals. They contend that part of the burden falls on workers through lower wages and on consumers through higher prices, not just on shareholders. Some also warn that a higher rate could encourage companies to shift profits or operations to lower-tax jurisdictions.
The global minimum tax
In 2021, more than 140 jurisdictions agreed through the Organisation for Economic Co-operation and Development to a 15 percent global minimum tax on the profits of large multinational corporations. The framework is designed to limit profit-shifting to tax havens by allowing other countries to top up taxes on companies that pay below the floor. Implementation varies by country, and U.S. participation depends on actions by Congress.
How the rate can be changed
The corporate income tax rate is set by statute, meaning any change requires legislation passed by both chambers of Congress and signed by the president. The president cannot raise or lower the rate by executive order. Tax bills often move through the budget reconciliation process, which allows passage in the Senate by a simple majority but limits the scope of what can be included.