Corporate Tax Revenue Drops Sharply Despite Record Profits Under Trump

By the Editorial Team · Sunday, October 18, 2026

Corporate tax revenue in the U.S. fell by about 15% to $381 billion in the fiscal year ending October 1, despite record corporate profits, due largely to tax reforms allowing accelerated depreciation and expanded deductions. This decline highlights how increased investments, especially in AI by companies like Microsoft and Google, are reducing taxable income and could lead to continued short-term drops in tax receipts.

Corporate tax revenue in the United States has declined sharply under President Donald Trump despite a surge in corporate profits to record levels, according to data released by the Treasury Department. For the fiscal year ending October 1, corporate income tax receipts fell by approximately 15%, dropping to $381 billion. This represents a decline of about $70 billion from the prior year and marks a cumulative drop of more than 25% since 2024, the final full fiscal year of the Biden administration.

The decrease in revenue has been attributed largely to tax reforms enacted by Republicans and signed into law by President Trump last year. These changes included provisions allowing companies to accelerate depreciation deductions on new investments, enabling firms to write off equipment and other capital expenditures more quickly than before. The tax law also expanded deductions related to research and development costs.

These accelerated write-offs have come amid a surge in corporate investment, particularly from major technology firms escalating spending on artificial intelligence (AI) initiatives. Companies such as Microsoft, Google, and Meta have committed hundreds of billions of dollars toward AI-related infrastructure, including data centers and cutting-edge computing hardware. This robust investment cycle has been credited with further reducing the tax base, even as company earnings continue to grow.

Economists note that the scale of this divergence between profits and tax revenue is unusual but understandable in light of the incentives created by the tax changes. “AI spending is projected to increase for the next few years, so these companies will be able to write off even more of their spending,” said Peter Berezin, chief economist at BCA Research. “If they didn’t have huge profits, that would be one thing. But they do.”

The broader fiscal picture for the U.S. government has also deteriorated, with the budget deficit approaching $2 trillion in the last fiscal year. Factors contributing to the widening deficit include increased military spending and higher interest payments on federal debt, which now exceeds $32 trillion—nearly equal to the country’s annual economic output.

While corporate profits have risen and individual income tax revenues have grown, the tax cuts have altered the timeline and scope of how companies can claim deductions, shifting incentives for investment and reducing taxable income. Business groups and some economists argue that the accelerated depreciation has historically spurred increased capital investment, benefiting economic growth.

However, some Democratic lawmakers have criticized the tax breaks, viewing them as disproportionately benefiting data center operators and other tech investments. Senator Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, proposed excluding certain data center components from the accelerated write-off provisions.

Supporters of the tax changes maintain that the current dip in tax revenue is temporary and that accelerated deductions will eventually taper off as companies exhaust eligible investments. They contend the incentives remain important to encourage future business investment. Critics, including David Kelly of J.P. Morgan Asset Management, argue the economy may be overstimulated already, with little need for further tax-driven incentives.

The continued expansion of AI-related investments and their complex effects on corporate taxation suggest that this trend in reduced corporate tax revenue could persist in the near term, even amid robust corporate profitability.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.