An appraisal of federal corporate income tax proposals from 1954 to 1964
Bamford, Frederick E.
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The purpose of this work is to examine the basic characteristics of the federal corporate income tax and to ascertain the importance of legislative proposals aimed at alleviating inequities and problems caused by the tax. This study is focused on the period 1954 to 1964 and subjects to economic analysis the proposed legislative amendments to the federal corporate income tax law. The several advocates of corporate tax reform concentrated their efforts on (1) Proposals to provide relief to small and new business, including measures to regulate corporate size and activities, and to modify the rate structure in order to eliminate or reduce various tax-induced inequities; (2) Proposals to reduce the disparity of tax treatment between competing enterprises and the use of tax incentives to encourage and direct United States investment abroad; (3) Proposals to encourage modernization and expansion of the nation's productive facilities and to increase the competitiveness of the United States in world markets; (4) Proposals for tax reduction and reform to achieve a higher rate of economic growth and full employment in relation to government fiscal policy. The most important findings of this study regarding the merits of the corporate tax in aiding either small business or curbing big business relate to its effect on investment, savings and consumption. It is shown in this study that authoritative opinion is divided on the proper techniques to be utilized and the answers to be obtained. To the extent that the tax is not shifted it tends to curtail business growth. If the tax is shifted, it is held to be regressive and opposed to sound tax principles. To the extent corporations can shift the tax, its effectiveness as a curb on monopoly is reduced. It is the conclusion of this study that none of the bills analyzed can adequately perform the regulatory functions advocated by their proponents. The taxation of competing enterprises relates particularly to the case of taxing cooperatives. The tax advantage enjoyed by cooperatives stems from the Corporation Tax Statute of 1909 which exempted them from taxation. The various proposals to tax cooperatives studied in this work would produce a marked improvement in tax equality but they would not end tax inequality completely. During the 1950's, the taxation of income from foreign sources became a controversial subject in the United States. Various bills exempting foreign-source income or lowering the applicable rate were introduced, but all were defeated. One of the more significant bills was introduced in 1959 by Congressman Hale Boggs. He wished to stimulate foreign investment by United States corporations and to eliminate the use of "tax haven" companies. Although the importance of the Boggs bill was recognized, the Revenue Act of 1962 failed to achieve the objectives of that bill. In 1961, the investment tax credit was proposed as a device to encourage expansion and modernization of the productive facilities of the United States. The economic effect of the credit device has had some measure of success in other countries and up to now seems to have had a degree of success also in the United States. With the growing recognition of the indictments against the corporation income tax, the use of indirect taxation should receive more attention as an available alternative.
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