The effective corporate income tax rate in the United States has fallen to its lowest level in decades, and the shrinking revenue stream is raising concerns among some policy experts.

More than 700 profitable corporations paid 10.4% in current federal income taxes last year, according to a recent report from the Institute on Taxation and Economic Policy (ITEP), a progressive think tank—less than half of the 21% statutory federal corporate income tax rate. The gap between the statutory rate and what companies actually pay is the product of deductions, credits, and other preferences written into the tax code. More than 250 of those companies paid effective tax rates below 7%, and 114 companies—including Tesla, Walt Disney, United Airlines, and DoorDash—paid no current federal income taxes at all, the report found.

ITEP calculated these tax rates based on analyses of annual financial reports filed with the Securities and Exchange Commission, rather than IRS data, which lags behind SEC filings.

Corporate tax revenue has plummeted under the Trump administration, which has ushered in a series of tax breaks intended to boost capital investment, even as corporate profits have soared. Treasury Department data released earlier this month showed a roughly 15% reduction—about $70 billion—in corporate income tax revenue, to $381 billion, in the fiscal year that ended Sept. 30. The drop is part of a decline of more than 25% in corporate tax revenue since 2024, when former President Joe Biden was in office.

Diminishing corporate tax revenue has left some policy experts worried about a ballooning federal deficit and the U.S. government's ability to fund itself. The Congressional Budget Office, the nonpartisan fiscal scorekeeper for Congress, projected that President Donald Trump's One Big Beautiful Bill Act (OBBBA) would add $3.4 trillion to the federal deficit over the next decade, the result of a $4.5 trillion decrease in revenues offset by a $1.1 trillion decrease in spending. Meanwhile, corporate profits have surged to a record $4.7 trillion over the 12 months through mid-2026, a 17% increase from the prior 12-month period.

But rather than the more than 100 companies paying nothing in federal income tax, it is the hundreds of corporations paying a reduced rate that present the bigger threat to tax revenue, according to Matt Gardner, ITEP senior fellow and coauthor of the report. The 706 companies saved a combined $198 billion last year as a result of corporate tax subsidies, while the 114 corporations that paid nothing accounted for only a fraction of that.

"There's a real concentration of profits at the top, and when those companies pay anything less than 21%, that's really what is knocking a hole in our corporate tax laws right now," Gardner told Fortune. "Their profits were so huge that their tax avoidance is way more consequential for the federal government's capacity to function than the zero tax corporations are."

Companies Taking Advantage of Corporate Tax Breaks

Though corporate tax breaks have been in place for decades, Trump has taken steps in both of his terms to slash these taxes, beginning in 2018 when he lowered the federal corporate income tax rate from 35% to 21%. OBBBA, passed last July, extended the 21% rate and made several breaks permanent while adding others, including immediate expensing of domestic research and development costs and 100% bonus depreciation for qualifying business property acquired after January 2025—two mechanisms that let companies deduct the full cost of qualifying investments in the year they are made rather than spreading the deductions over time.

Those two provisions are the breaks companies have taken advantage of the most, Gardner noted. The four companies with the largest tax breaks—Alphabet, Microsoft, Amazon, and Meta—saved a collective $46 billion through those two opportunities, according to the report, using the exemptions to help fund massive AI infrastructure build-outs.

Meta in particular has attracted scrutiny over how it has used the R&D tax break. The tech company reportedly classified its AI data centers as experimental "pilot models," according to reports cited by senators, which would allow it to receive the tax break. Sens. Ron Wyden (D-Ore.), Sheldon Whitehouse (D-R.I.), Elizabeth Warren (D-Mass.), Catherine Cortez Masto (D-Nev.), Maggie Hassan (D-N.H.), Ben Ray Luján (D-N.M.), and Peter Welch (D-Vt.) wrote a letter to Meta CEO Mark Zuckerberg earlier this month demanding answers by Oct. 31 on how the investments Meta is claiming tax breaks for differ from routine costs for equipping data centers.

"The federal research credit can be a useful and necessary tool to support our nation's innovation economy and cutting-edge research," the senators wrote. "Subsidizing your A.I. data center build is not close to meeting this standard."

Meta said it is one of the largest investors in R&D in the U.S., investing more than $200 billion over the past five years, including $57 billion last year alone.

"Unlike traditional data centers, AI-optimized data centers are inherently new and require extensive testing and experimentation that cannot be simulated in order to get the design and build right," a Meta spokesperson told Fortune in a statement. "This is precisely the kind of domestic investment Congress encouraged when it established these tax incentives decades ago."

At stake in the dispute is how a research credit first enacted in 1981, decades before large-scale AI data centers, should apply to today's investments.

Gardner expects this trend of leaning heavily on depreciation and R&D bonuses to continue because of the permanent features of the tax law Trump implemented.

"There's every reason to expect this to be the new normal going forward, unless the next Congress, the next presidential administration, decides to reverse them," he said.

The Case Against Corporate Income Taxes

One school of thought in favor of higher corporate taxes argues that greater revenue can reduce the deficit, which can lower interest rates and accelerate borrowing and subsequent growth. But other policy experts have called foul on increasing corporate taxes, instead arguing that higher taxes would disincentivize investments and throttle America's competitiveness on the global stage, ultimately weakening opportunities for economic growth.

Adam Michel, director of tax policy studies at the libertarian Cato Institute, argued in an April Substack post that the R&D credit has had bipartisan support since its 1981 introduction under the Economic Recovery Tax Act. The law, nicknamed the Kemp-Roth tax cut for Rep. Jack Kemp (R-N.Y.) and Sen. William Roth (R-Del.), was part of then-President Ronald Reagan's efforts to build a coalition of more conservative Democrats to support his spending cuts. Michel argued that a depreciation tax break would bolster economic growth, as it lowers immediately taxable income but not the nominal amount of tax payments, giving businesses more of an opportunity to invest.

Tax breaks "don't reveal a scandal," Michel wrote. "They are a list of popular, bipartisan policies. Companies using them are doing what the law intends, often for good reason."

This story was originally featured on Fortune.com.