Why Indirect Corporate Tax Measures Could Be Key to Reducing U.S. Deficit

The United States is exploring new paths to address its massive budget shortfall, with indirect corporate tax methods emerging as potential solutions. With the federal deficit reaching roughly $1.8 trillion in fiscal year 2024, spending on entitlement programs—like Social Security, Medicare, and Medicaid—has become a major fiscal strain. Meanwhile, individual income tax contributions make up approximately 8.4% of GDP, whereas corporate tax receipts hover around a mere 1.8%, spotlighting the imbalance in who contributes most of the tax revenue.
For decades, corporations have enjoyed significant tailwinds: falling statutory rates, lower borrowing costs, and favorable financial conditions have together added up to a substantial boost in profits. Analysts estimate that reduced interest expenses and corporate tax rates accounted for over 40% of real corporate profit growth from 1989 through 2019. As pressure builds to close the deficit gap, the government is turning to less conventional tools instead of straightforward tax hikes.
One such tool is tariffs. These duties have delivered substantial revenue, though many companies have shifted the burden onto consumers through higher prices. Another strategy involves government equity stakes in major firms across key sectors—technology, industrials, and infrastructure. These include firms with substantial market influence, where the government’s ownership positions could generate revenue without needing legislation to increase tax rates.
While these stealth-tax approaches might boost revenue, they come with risks. Corporate independence can be compromised, public sector involvement may distort competitive dynamics, and the economic orthodoxy around minimal state interference is called into question. Still, in a politicized environment where raising corporate tax rates faces substantial opposition, indirect mechanisms may be the most viable path forward.
At the same time, distributing these revenues fairly remains a challenge. If tariffs are passed on to consumers, or if government ownership leads to inefficiencies, the intended deficit relief could be offset by economic cost elsewhere. Success will depend on careful design: ensuring transparency, preserving competition, and preventing unintended consequences for markets.
For now, those advocating for deficit reduction see these alternative revenue paths as a way to avoid direct corporate tax hikes. If implemented well, indirect corporate taxation via tariffs and strategic equity participation might help bridge the gap in revenue needed to stabilize the national budget. But only rigorous oversight and policy discipline will tell whether these measures deliver results without undermining growth or investor confidence.