Originally the federal income tax law sought to "tax income closest to the source," presumably because the farther from the source, the more easily income might escape detection and therefore taxation. In the hearings over the 1913 income tax law one member of Congress suggested simply taxing each shareholder on his pro rata share of corporate income, but got shot down.
As far as eliminating the corporate income tax today, look at all the furor the advocates of punitive taxation (notice I didn't say "the advocates of statism" ) have raised over Bush's proposal to cut taxation of dividends. Can you imagine the holy hysteria they'd raise over cutting the corporate tax instead? It seems likely that even more people would agree that such a cut in tax constituted a "tax cut for the wealthy" since in their minds it would be going "to corporations instead of people." David Levenstam In a message dated 1/13/03 7:50:22 PM, [EMAIL PROTECTED] writes: << On Mon, Jan 13, 2003 at 01:44:59PM -0800, Fred Foldvary wrote: > There is also a supply-side effect from cutting the marginal tax rate, from > less uncertainty about the company as it shifts to less debt and more > equity, as well as more investor confidence when the profits are sent to > the shareholders rather than retained by possibly theiving executives. Any idea why the dividend tax, instead of the corporate income tax, is being proposed for a cut? If we want to end double taxation of dividends, it makes more sense to me to eliminate the corporate income tax instead of the dividend tax. Cutting taxes on dividends while keeping taxes on capital gains seems to provide a perverse incentive for companies to retain as little profits as possible, leading to a higher rate of corporate bankruptcy in the future. I predict we'll also see companies issue new stock and then immediately distribute the capital as dividends in order to dilute their stock value - the opposite of the stock buy-back programs that companies undertake today to avoid paying dividends. >>
