The difficulties connected with corporate taxation were from the beginning quite obvious. Much of the property of corporations is intangible and difficult to evaluate. Tangible property is often hard to find and still harder to assess. There are a multitude of ways in which assessments can be avoided and assets concealed. An ad valorem property tax is almost out of the question. A tax based upon capital stock is only slightly more successful and perhaps a great deal more unfair. The capital stock of a corporation generally has very little to do with the value of the corporation's property, franchises, and privileges, and still less to do with its ability to pay taxes. A tax based on capital stock rests alike on a corporation paying twenty percent dividends and one running a deficit; upon a corporation with watered stock and upon one holding a huge surplus. The tax can, to a large extent, be avoided by a proper manipulation of stock, and on the other hand it is often disastrous to a corporation fighting insolvency by only a narrow margin. For example, in Michigan in 1928, the beet sugar industry, which is largely incorporated, was so seriously threatened by the Michigan capital stock corporation tax that many concerns were forced to dissolve in order to avoid the tax and escape bankruptcy.

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