Taxing Bigness

51 Pages Posted: 14 Dec 2012 Last revised: 24 Jan 2013

See all articles by Steven A. Bank

Steven A. Bank

University of California, Los Angeles (UCLA) - School of Law

Date Written: December 12, 2012


Currently, the graduated marginal rate corporate income tax has come under significant criticism because it neither redistributes wealth from large corporations to small businesses, nor accurately reflects the ability to pay of the individual stockholders who own the corporations. Moreover, Congress has introduced bubble rates that perversely result in some corporations paying higher rates than higher earning corporations. The Congressional Budget Office has identified the repeal of graduated corporate income tax rates on its list of potential revenue raisers and several observers have called the system “indefensible” and without “economic justification.”

This paper provides historical perspective for the topic. To the extent that historians have looked at this issue in their review of the period, they have concluded that the introduction of the progressive corporate rate structure in 1935 was purely symbolic, since the rates could not have possibly redistributed corporate wealth or led to the break-up of large corporate structures. This paper argues that the change was not symbolic – it was designed to introduce differentiation between large and small corporations – but this differentiation is no longer necessary because of the advent of alternative entities for small businesses.

Keywords: corporate income tax, corporate tax rates, corporate wealth, redistribution of tax rates for corporations

JEL Classification: H20, H23, H25

Suggested Citation

Bank, Steven A., Taxing Bigness (December 12, 2012). Tax Law Review (2013, Forthcoming), UCLA School of Law, Law-Econ Research Paper No. 12-20, Available at SSRN:

Steven A. Bank (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

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