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26 Tax Foundation's Tax Review 1 (1965)

handle is hein.tera/tafoutaxt0028 and id is 1 raw text is: Tax Review JaWuary, .9.. Vol. XXVI, No. I Taxing-and Untaxing- Business By C. Lowell Harriss Economic Consultant, Tax Foundation, Inc. MORE REDUCTION in Federal tax rates seems pos- sible within the next few years. What priorities should be set? In the two decades since World War II personal income tax rates have been cut (substantially for married couples). Small corporations are now taxed at a rate (22 percent) roughly in line with the personal income tax on most income and less than twice the prewar level. But companies which produce most of the country's total output, which provide most jobs, which account for a large part of economic progress, these companies are taxed at 48 percent, roughly, three times the prewar level. Reduction in the 48 percent rate should, I think, have high priority in tax relief over the next few years. (Views expressed are my own, and not necessarily- those of any organization with which I am connected.) Business firms are the organizations upon which we rely to produce. Over 80 percent of the net in- come created in this country is produced in pri- vately-owned enterprises. Corporations accounted for two-thirds of the net income originating in the private sector in 1963. The business firm is our major agency for eco- nomic growth. Business undertakings are groups of people seeking to benefit themselves by serving others, by producing goods and services which the public wants, and producing with the minimum of inputs per unit of output. Most of the venturesome- ness which leads to the innovations that contribute so much to rising living standards will work out through business organizations. The accomplishments of the individuals as- sociated in business enterprises will depend upon many things: inherent ability and acquired skill; the willingness of workers to exert effort; the amount of capital; the state of technology and speed of scientific advance; the degree of competi- This Issue in Brief Among government-created obsta- cles to business, says Prof. Harriss in this Review, taxes rank high. Reduction of the 48 percent cor- porate tax rate applying to the U.S. concerns producing most of the coun- try's output, he says, should have a high priority in tax relief over the next few years. A cut by perhaps 2 percentage points a year to the 25-30 percent range, seems possible to Dr. Harriss. Consumers would then benefit from price reductions, he says, investment for modernization and expansion would be higher. The entire public would benefit as the business economy gained freedom to decide on the basis of consumer pref- erence and productive possibilities, unaffected by essentially irrelevant considerations of taxation, Dr. Harriss says. Copyright 1965 by Tax Foundation, Inc., 50 Rockefeller Plaza, New York, N.Y. 10020, JUdson 2-0880 1

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