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The corporate income tax is under attack. The former Secretary of the Treasury has announced that it should be abolished, and the current drive to eliminate the taxation of dividends can be seen as the first step toward that goal. A significant number of tax academics have argued for repeal of the tax. Other academics have urged radical reform of the tax. And no serious academic has in recent years mounted a convincing normative defense of why this cumbersome tax should be retained.

And yet it does not seem likely that the corporate tax will be repealed any time soon. Current proposals focus more on repealing the tax on dividends while retaining the corporate-level tax, and even more radical reform efforts like the Flat Tax proposal would maintain a corporate level tax on above-normal returns. When former Secretary of the Treasury Paul O'Neill announced that he favored repealing the corporate tax on the basis of his experience as a CEO, the proposal did not have any political traction. In the current political climate, demise of the corporate tax due to taxpayer self-help seems much more likely than actual repeal.


Reproduced with permission.