Paul L. Caron

Saturday, June 11, 2011

The Top Tax Rate on Corporate Profits, 1913-2011

Tax Analysts Jim Nunns (Tax Policy Center) has published The Top Total Income Tax Rate on Corporate Profits, 1913-2011, 131 Tax Notes 1081 (June 6, 2011):

Corporate profits are taxed under both the corporate and individual income taxes. The total income tax rate on corporate profits therefore depends on the corporate rate and the individual rates on dividends and capital gains, as well as on the share of after-tax profits corporations pay as dividends, the share of stock held in retirement and other nontaxable accounts, and the timing of capital gains realizations. To illustrate how these factors determine the total income tax rate on corporate profits, I made assumptions about corporate distributions, stock holdings in tax-favored accounts and patterns of capital gains realizations, and applied those factors to the top corporate and individual rates on dividends and capital gains over the 1913-2011 period (see graph).


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It is entirely possible that even Progressives need to recognize that the time for a corporate income tax has passed, particularly since multi-national companies can play off one regime vs another. This post here is a good summary.

Hopefully the questions involving the corporate income tax will soon revolve around what to replace it with. Some have proposed taxing all business income, but the change to a full flow through system such as S Corps and Partnerships may make more sense.

Posted by: Sid (real one) | Jun 11, 2011 5:00:55 AM