The Repeal of Graduated Corporate Tax Rates
Jeffrey L. Kwall
Loyola University Chicago School of Law
June 27, 2011
Tax Notes, p. 1, June 2011
Loyola University Chicago School of Law Research Paper No. 2011-022
Section 11 applies a bracket system to corporations, imposing lower tax rates on lower amounts of corporate income. Similarly, section 1 applies a bracket system to individuals. The bracket system in section 1 is intended to adjust the tax rate to the taxpayer’s standard of living. Modest and subsistence incomes bear little or no income tax. Higher incomes bear tax rates as high as 35 percent. By contrast, the bracket system of section 11 bears no relation to standards of living. Corporations are artificial entities that do not have variable standards of living. Moreover, the income level of a corporation bears no relation to the standards of living of its shareholders. The bracket system of section 11 may induce privately held businesses to incorporate because it effectively provides corporations with high-income shareholders in the top individual tax bracket access to two sets of low tax brackets, one under section 1 and a second under section 11. This proposal would repeal the lower tax brackets in section 11 and apply the top corporate rate, currently 35 percent, to all corporations. This change would eliminate the incentive for business owners to incorporate to receive the lower corporate tax rates. More significantly, repealing the lower corporate marginal rates could increase annual tax revenue by an estimated $3 billion.
Number of Pages in PDF File: 5
Keywords: graduated rates, corporate tax, tax rates, marginal rates, tax brackets, double taxation
JEL Classification: D63, E62, H21, H25, K34
Date posted: July 6, 2011
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