Thursday, January 27, 2022
David Elkins (Netanya; Google Scholar), The Integration and Dis-Integration of the Corporate Tax Regime:
An ideal corporate tax regime would impose the same overall tax burden on income earned via a corporation as it did on income earned directly by an individual. Any discrepancy between the two violates the norms of horizontal equity, economic efficiency, and most likely vertical equity as well. Since the turn of the current century, lawmakers have responded to these concerns by gradually transforming the corporate tax regime from a “classical” or double taxation model to one that at least in very broad outline encapsulates the notion of full integration. True, the current state of affairs does not entirely eliminate the discrepancies. While closer to full integration than any corporate tax regime that the United States has until now experienced, it does contain pockets of both partial integration (in which income earned via a corporation is subject to a heavier tax burden than income earned directly by an individual) and, more rarely, of super-integration (in which income earned via a corporation is subject to a lighter tax burden than income earned directly by an individual). The goal of corporate tax reform should be to remove those incongruities and mold a more coherent overall income tax structure.
Unfortunately, the tax reform proposals that have recently been published by the administration and by the House Committee on Ways and Means appear to be pushing in the opposite direction. Instead of moving toward a more fully integrated the corporate tax regime, they constitute a retreat from the idea of integration. Without regard to one’s views on the appropriate level of taxation, the dis-integration of the corporate tax regime would be a regrettable development.