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Parity Lost: The Price of a Corporate Tax in a Progressive Tax World
Nevada Law Journal (2008)
  • Richard Winchester, Thomas Jefferson School of Law
The United States has always taxed income at progressive rates, so that an individual is required to pay a larger portion of his income in tax as his income goes up. Whenever the United States has had an income tax, it has also imposed an entity level tax on the income of certain businesses. Both the structure of the progressive tax rates and the design of the entity level tax on business profits have evolved over the course of time, resulting in a wide range of incentives and outcomes. This article recounts the early history of the income tax in the United States, focusing on how an entity level tax on business profits operated within the context of a system that taxed individuals at progressive rates. It highlights the disparities created by the interaction of the rules and recounts the efforts made to reduce those disparities and restore tax parity. The experience illustrates the complications produced by the combination of rules and also sheds light on the tradeoffs lawmakers were willing to make in the pursuit of multiple objectives. But more than anything, the story calls into question whether the system achieved its progressive goals when it struggled to establish parity in the taxation of business profits.
  • Accumulated Earnings Tax
Publication Date
Citation Information
Richard Winchester, Parity Lost: The Price of a Corporate Tax in a Progressive Tax World, 9 Nev. L.J. 130 (2008).