The Federal tax on corporate profits has been in effect since 1909, but controversy continues to surround the tax despite its long history. Indeed, the very existence of a corporate income tax has been questioned by some and defended by others. In the area of economic analysis, there has been a degree of uncertainty about the effects of the tax. However, economists generally agree that in the long run the tax is not borne exclusively by the owners of corporate capital, and that the tax results in a certain loss in economic efficiency. All effects aside, the size of the corporate income tax has diminished over the past 30 years. Receipts from the tax have fallen, as have the average and marginal effective tax rates.

On September 26, 1985 tax reform proposals for use in mark up in the Committee on Ways and Means were announced. The Administration has also proposed some changes in its May 28, 1985 tax reform, including the elimination of indexing of inventories. This report updates effective tax rates in "Effects of Business Tax Provisions in the Administration's Tax Proposal," Congressional Research Service Report No. 85-783 E, June 6, 1985 to incorporate these proposals.