Corporate income tax

The corporate income tax is a tax on the profits of companies organized as C corporations. Profits distributed as dividends are then taxed again at the shareholder level, which critics call double taxation. Pass-through businesses such as partnerships and S corporations are taxed on the owners' personal returns instead.

The Tax Cuts and Jobs Act of 2017 lowered the federal statutory rate from 35 percent to a flat 21 percent, and made other changes, such as moving toward a territorial system for foreign profits and allowing immediate expensing of some investment. States levy their own taxes. The effective tax rate companies pay is often lower than the statutory rate because of deductions, credits and international structures, and a 15 percent minimum tax on large corporations was added in 2022.

Economists debate who ultimately bears it: owners of capital, workers through lower wages, or consumers through higher prices; most estimates say a significant share falls on labor over the long term. Conservatives argue that lower corporate rates improve competitiveness and investment, citing international comparisons, while others argue that corporations are undertaxed and should contribute more. The debate relates to tax expenditures and to proposals such as opportunity zones.