It appears that the recent dip in corporate tax collections, which the Biden administration has noted for concern and justification for increasing the corporate tax rate among other proposals to raise taxes on corporations, was largely due to temporary factors related to the pandemic rather than the Tax Cuts and Jobs Acts (TCJA) of 2017. In its latest forecast, the Congressional Budget Office (CBO) expects corporate tax collections will rebound this year to $238 billion (1.1 percent of GDP), $317 billion (1.3 percent of GDP) next year, and $379 billion (1.5 percent of GDP) in 2023—a record high in nominal terms and nearly matching average corporate tax collections as a share of GDP prior to the TCJA.

The accompanying charts show CBO’s forecasts of corporate tax revenue from before and after the TCJA, indicating expectations that by 2023 corporate tax revenue will nearly reach the levels forecast prior to passage of the TCJA. In June 2017, prior to enactment of the TCJA, CBO forecasted corporate tax revenue would reach $395 billion in 2023, which is within 4 percent of its current estimate. The current and pre-TCJA forecasts track very closely through 2025 (and then diverge, though it is not clear why).

The Biden administration’s own forecast from the Office of Management and Budget (OMB) tells a similar story, predicting that under current law, corporate tax revenues will climb to 1.63 percent of GDP in 2025, slightly exceeding the pre-TCJA prediction (1.62 percent) from the Trump administration’s OMB in 2017. In nominal dollars, forecasted corporate tax revenue for 2025 estimated by the 2017 OMB is within 5 percent of the forecast by the Biden administration’s OMB.

In terms of actual collections, corporate tax revenue as a share of GDP averaged 1.55 percent in the 10 years prior to the TCJA (2008-2017), just slightly more than what CBO currently forecasts for 2023 (1.50 percent), 2024 (1.49 percent), and 2025 (1.49 percent), and slightly less than what OMB forecasts for 2024 (1.61 percent) and 2025 (1.63 percent).

One reason the CBO and OMB expect corporate tax collections to return to historic levels is that the corporate tax base was broadened in the TCJA along with the reduction in the corporate tax rate. Another reason is that corporate profits, and the economy, have grown considerably since the TCJA and are expected to continue growing at a rapid clip this year and next.

In light of these forecasts, which could  be revised upwards further given the pace of growth in the economy and corporate profits, it seems clear that the 2017 tax reform did not substantially reduce the revenue potential of the corporate tax. Policymakers should wait to see how well the economy recovers from here before proposing higher corporate taxes.