The Corporation Income Tax: An Examination of Its Role in the Federal Tax System

December 1, 1968

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Research Publication No. 19

Executive Summary
The new Administration and Congress in 1969 will begin a fresh examination of the Federal tax system and needs for revising it. The present study deals with the second most important part of the tax system (in terms of revenue): the corporation income tax. The examination of certain major aspects of the tax is designed to help, not only in the discussions of revision in anyone year, but also over a much longer future,

The study reviews the history of the corporation tax from its initial form as an “excise” tax in 1909. The historical section covers various experiments and proposals that have been made, as well as changes that have proved more or less permanent. The central purpose has been to analyze recent experience and, research in order to suggest some priorities in tax revision. The volume of research relating directly and indirectly to the corporation income tax is so large-that a review of results, necessarily, selective, and tentative.

On the question of tax incidence, a hypothesis is suggested that the burden is widely spread through changes in various forms of income, not merely through changes in dividends or in consumer prices.

The most significant effect of the corporation tax appears to be on the total volume of business investment expenditures. A substantial reduction in the rate of the tax from its present all-time high (with the 1968 surcharge) would be a major revision for the long-run.


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