Have Excess Returns to Corporations Been Increasing Over Time?

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 tax returns of C corporations 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.