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1 Scott Greenberg, Corporate Integration: An Important Component of Tax Reform 1 (2016)

handle is hein.taxfoundation/corpintictxr0001 and id is 1 raw text is: 



No. 506
Apr. 2016

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Corporate Integration: An Important

Component of Tax Reform

By  Scott  Greenberg

Key   Findings:

    The combined top federal tax rate on equity-financed corporate income in the
    United States is 50.47 percent, compared to a top federal tax rate of 43.4 percent
    on other business income.

    Equity-financed corporate income is subject to a higher tax rate than other
    business income because it is subject to a double tax: once on the corporate level,
    through the corporate income tax, and once on the shareholder level, though the
    individual income tax on dividends.

    Taxing equity-financed corporate income at a higher rate encourages the
    misallocation of investment capital. Ideally, all business income would be subject to
    the same top tax rate, regardless of the legal form of the business or the method
    of financing.

    Short of reforming the entire U.S. tax code, integrating the corporate and
    individual income taxes could eliminate the double taxation of corporate income.

    There are several ways to integrate the corporate and individual tax codes,
    including allowing shareholders a credit for corporate taxes paid (credit imputation)
    or allowing corporations to deduct dividends paid (dividends paid deduction). Each
    of these strategies for corporate integration presents different opportunities and

    Corporate integration would accomplish many of the same goals as a corporate
    rate cut, such as making the U.S. business climate more competitive. It could also
    end several economic distortions created by the current tax code, including the tax
    preference for debt financing over equity financing.

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