The Impact and Burden of Wartime Corporation Taxes

Abstract

The corporation tax structure as most recently revised in I942 is yielding an unprecedented volume of revenue. Total tax liabilities of corporations in I942 will be ten times as large as they were in I939 (Table I), the major part of the increase coming from an excess profits tax which was not enacted until 1940. This tax alone accounts for almost $8 billion, or two thirds of total corporate tax liabilities in 1942. But in spite of the huge increase in corporate taxes, it is estimated that income after taxes for all corporations will have increased from $4 billion in I939 to over $7 billion in I942. For profitable corporations, alone, income after taxes will have increased from $6 billion to over $8 billion. These increases in income after taxes are explained by the fact that corporate income before taxes rose from over $5 billion in 1939 to almost $i9 billion in I942. A comparison of income after taxes in I942 with I94I of corporations in general shows an increase of 40%. However, Treasury estimates indicate that net income after taxes for profitable corporations, alone, will be less in I942 than in I94I. The estimated increase of net income after taxes in 1942 over I941 results from a decline in the estimated deficits of unprofitable corporations. Therefore, many individual corporations will have suffered diminutions in net income in 1942 as compared with I94i.1