Question : Is the corporate tax schedule progressive? Why or why not?
Is the corporate tax schedule progressive? Why or why not?
The individual and corporate income taxes and the estate tax are all progressive.The estate tax is the most progressive federal tax. The individual and corporate income taxes are also progressive. In contrast, payroll taxes for Social Security and Medicare are regressive, claiming a larger share of income from lower-income than from higher-income households. Although the overall federal tax system is progressive, with total federal tax burdens a larger percentage of income for higher-income households than for lower-income households, not all taxes within the federal system are equally progressive. Some federal taxes are actually regressive as they are a larger percentage of income for lower-income than for higher-income households. The corporate income tax is progressive because most of its burden falls on income from dividends, capital gains, and other forms of capital income that are disproportionately received by high-income households.Here are three of the biggest problems with repealing the corporate income tax:First, a business that is structured as a corporation can hold onto its profits for years before paying them out to its shareholders, who only then (if ever) will pay personal income tax on the income. With no corporate income tax, high-income people could create shell corporations to indefinitely defer paying individual income taxes on much of their income. Second, even when corporate profits are paid out (as stock dividends), only a fraction are paid to individuals rather than to tax-exempt entities not subject to the personal income tax.Third, the corporate income tax is ultimately borne by shareholders and therefore is a very progressive tax, which means any attempt to replace it with another tax would likely result in a less progressive tax systemAhern, William. (2007). Progressive Corporate Taxes Make No Sense, Even Progressively Speaking -- Rangel's Bill Holds Out Hope for Simplification. Tax Fundation.
Burman, Leonard E. (2007)."Fairness in Tax Policy: Testimony Before the Subcommittee on Financial Services and General Government, House Appropriations Committee." Washington, DC: Urban Institute.
Joint Committee on Taxation. (2015). “Fairness and Tax Policy.” JCX-48-15. Washington, DC: Joint Committee on Taxation.