Corporate profits may be soaring to new highs, but corporate tax payments are plunging thanks in large part to the breaks Republicans included in their One Big Beautiful Bill Act last year.
Politico’s Brian Faler reports that tech companies pouring money into building out AI infrastructure are taking advantage of the tax incentives for business investments passed as part of the GOP’s 2025 bill.
That’s taken a big bite out of tax receipts. The Congressional Budget Office, in its Monthly Budget Review released last week, said that corporate tax receipts over the first 11 months of the fiscal year fell by $96 billion, or 25%, going from $390 billion over the same period in fiscal 2025 to $294 billion so far this year.
“The 2025 reconciliation act allows corporations to take larger deductions for certain investments, thereby reducing some payments and offsetting the increases in those receipts that otherwise would have been expected, given the rise in corporate income,” CBO said.
Faler notes that the big drop this year follows a 15% decrease in corporate tax payments last year. “That’s fueling complaints those investment breaks are providing a windfall for the tech world, and giving a bad deal to taxpayers as Google, Microsoft and others would be spending oodles of cash on AI regardless of the tax incentives,” he writes.
The companies are benefiting from Republican changes, including expanded breaks for research and development, immediate expensing of investments and the loosening of a Biden-era minimum tax. Meta, the parent company of Facebook and Instagram, said in April that $8 billion of the $26.8 billion in net income it reported for the first quarter of 2026 — the most profitable quarter in its history — resulted from a one-time tax benefit due to changes in the One Big Beautiful Bill Act.
Faler adds that the AI buildout and GOP tax bill aren’t the only factors behind the drop in corporate tax payments, and that an AI boom could still turn out to generate additional revenue for the Treasury in the future. But AI investments might have benefited federal tax receipts without the new tax breaks.
“A perennial question with tax incentives is whether they are pushing people to do something the government wants them to do, and which they wouldn’t have done otherwise — or whether they’re simply giving people money for things they were going to do anyway,” Faler writes. In this case, it looks like the latter, Matt Gardner, a senior fellow at the liberal Institute on Taxation and Economic Policy, tells Politico. Companies would have poured money into artificial intelligence even without the tax breaks.
“They’re going to do it either way,” Gardner said. “That they’re getting generous tax breaks for doing so is just icing on the cake for them.”
But it’s not so sweet for the U.S. government right now.