Federal Revenue
Corporate taxes are one of the main sources of money the federal government uses to fund programs, defense and interest on the debt. Changes to the rate can shift hundreds of billions of dollars in revenue over a decade.
In plain English
When companies pay tax on profits.
It's the tax companies pay to the federal government on the money they earn after subtracting their business costs.
Simple example
In fiscal year 2024, the Congressional Budget Office projects federal corporate income tax collections of about $500 billion, roughly 10 percent of total federal revenue.
Why it matters
What the term actually changes.
Economic Effects
Economists debate how the tax burden is split among shareholders, workers and consumers. Supporters of higher rates say corporations can afford to pay more; opponents argue higher rates can reduce wages, investment and hiring.
How it works
The mechanics, in practice.
Set By Congress
The statutory rate is written into the Internal Revenue Code and can only be changed by legislation passed by Congress and signed by the president. A president cannot raise or lower the rate by executive order.
Applied To Profits
Corporations calculate taxable income by subtracting allowable deductions and credits from gross revenue, then apply the 21 percent rate. The effective rate many companies actually pay is often lower due to credits, deductions and international tax rules.
Related guide
How does the federal corporate income tax work?
A look at how the United States taxes corporate profits, how the rate has changed, and what's at stake in the debate over raising it.
Read the guide → Related issue brief
Should the federal corporate income tax rate be raised?
Lawmakers and economists remain divided over whether to lift the 21 percent corporate rate set by the 2017 tax law.
Read the brief →You’ve learned the term. Now vote.
Should the federal corporate income tax rate be raised?
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