Paul L. Caron

Saturday, October 2, 2021

A Response To Avi-Yonah's A New Corporate Tax

Kellen Yent (LL.M. (Tax) 2021, Florida; Senior Tax Associate, PwC (Washington, D.C.)), A Response to "A New Corporate Tax":

This is a response to Professor Avi-Yonah's paper on a "New Corporate Tax" (2021). This paper's aim is to discuss the justifications and aims of a corporate tax and corporate tax policy. Specifically, this paper seeks to understand Avi-Yonah's proposal of a graduated system for the corporate tax, which is highly relevant given the new Build Back Better tax proposals from September 2021. A graduated system, may at first seem to fix many of the problems a current, stagnant rate corporate tax system has. However, after discussing the aims and justifications of a corporate tax, this seems to miss the mark. The paper seeks to ask the question: if the answer is to really tax the rich, why not do it in a more direct and sensible way, given that the actual incidence of such a tax does not fall on "corporations"?

In light of the above discussion on the CIT’s justifications, given the stated aim of taxing wealthy shareholders, it can be seen that there is no one true justification for placing an indirect tax on shareholders through the earning of corporate profits. Though the aim is to tax wealthy shareholders, it can be seen that justifications for such tax do not fall directly within a revenue raising or distributive justice rationale. The further problem of who bears the ultimate burden of this tax muddles matters even further: does it actually meet the aim of taxing these wealthy shareholders if economists are unsure of where the incidence lies? Lastly, modifications proposed to the CIT by Avi-Yonah may fall short of the ultimate aim of taxing the wealthy corporate owners, as only those at the top of the profit’s spectrum will be captured by his anti-monopolistic corporate tax. All of this said, major changes to the global corporate tax regime may be coming, which may give policy makers in the future the chance they need to recalibrate the CIT or eliminate it completely, in favor of taxes like those proposed by Brauner [The Non-Sense Tax: A Reply to New Corporate Income Tax Advocacy, 2008 Mich. St. L. Rev. 591] or maybe even a consumption tax.

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