Abstract
This paper examines the difference between a corporate income tax base and a corporate consumption tax base over time. Using a micro-data panel of C corporations’ tax returns from 1992 to 2013, we estimate the fraction of the tax base attributable to the risk-free return in each year, and show that it has gradually declined over time, averaging 40 percent from 1992-2002 and 25 percent from 2003-2013. This decrease means that the difference between an income tax base and a consumption tax base has also declined, and suggests that “excess” returns are becoming more important to the tax base.
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