The Cashless Corporate Tax

Abstract:     
This article attempts to replicate the most important features of the current corporate tax system in an alternative "tax" system under which the government participates in corporate income not through involuntary impositions, but as a shareholder. The article shows how the government's shareholdings would need to be structured to mimic current management incentives viz. the distribution of cash, thus producing desired revenue flows. The purpose of the proposal is to align corporate and government incentives: by maximizing shareholder value, the corporation also maximizes the government's value and ultimately its revenue. Thus, among other things, there would be no ability on the part of corporations to engage in some types of "tax shelter" activity.

Number of Pages in PDF File: 44

working papers series