Friday, September 11, 2020
Revuen S. Avi-Yonah (Michigan) presents A New Corporate Tax, 99 Tax Notes Int’l 497 (July 27, 2020), virtually today at Florida as part of its Tax Colloquium Series:
The US corporate tax is over 100 years old, and many academic observers have doubted its value. The standard explanation for why we tax corporations is that it is an indirect tax on shareholders, but that is not a valid reason to have a corporate tax because (a) shareholders can be taxed directly and (b) many shareholders are tax exempt and should not be taxed at all. However, there is another reason to tax corporations, which was in fact the original rationale why we adopted the corporate tax in 1909: To limit the power of large monopolistic corporations and regulate their activities. If that is the reason for the corporate tax, the US should have a different tax structure than the current 21% flat tax.
The corporate tax should be set at zero for normal returns and at a sharply progressive rate for super-normal returns (rents).