From Sword to Shield : The Transformation of the Corporate Income Tax, 1861 to Present

The U.S. corporate income tax - and in particular the double taxation of corporate income - has long been one of the most criticized and stubbornly persistent aspects of the federal revenue system. Unlike in most other industrialized countries, corporate income is taxed twice, first at the entity level and again at the shareholder level when distributed as a dividend. The conventional wisdom has been that this double taxation was part of the system's original design over a century ago and has survived despite withering opposition from business interests. In both cases, history tells another tale. Double taxation as we know it today did not appear until several decades after the corporate income tax was first adopted. Moreover, it was embraced by corporate representatives at the outset and in subsequent years businesses have been far more ambivalent about its existence than is popularly assumed. From Sword to Shield: The Transformation of the Corporate Income Tax, 1861 to Present is the first historical account of the evolution of the corporate income tax in America. Professor Steven A. Bank explains the origins of corporate income tax and the political, economic, and social forces that transformed it from a sword against evasion of the individual income tax to a shield against government and shareholder interference with the management of corporate funds. Contents......Page 6 Introduction......Page 10 CHAPTER 1. THE ROOTS OF A CORPORATE TAX......Page 34 I. The Early Republic and Antebellum Years......Page 35 A. The Development of the Property Tax......Page 36 B. Special Charters......Page 38 C. Industry-Specific Taxation......Page 42 II. Civil War and Reconstruction......Page 45 CHAPTER 2. FROM INDUSTRY TAXES TO CORPORATE TAXES......Page 58 A. Breakdown of the Property Tax......Page 59 B. General Incorporation Statutes and the Spread of the Corporate Form......Page 67 II. A Federal Corporate Income Tax......Page 73 CHAPTER 3. CORPORATE TAX AT THE TURN OF THE CENTURY......Page 90 I. Spanish-American War......Page 91 A. Bailey-Cummins Income Tax......Page 95 B. Corporate Excise Tax......Page 99 C. Prelude to the Sixteenth Amendment......Page 113 CHAPTER 4. THE RISE OF THE SEPARATE CORPORATE TAX......Page 116 I. Revenue Act of 1913......Page 117 II. Revenue Act of 1917......Page 122 III. Revenue Act of 1918......Page 131 IV. Revenue Act of 1921......Page 136 CHAPTER 5. NONRECOGNITION AND THE CORPORATE TAX SHIELD......Page 144 I. Background......Page 145 II. The Push for Resolution......Page 149 III. Revenue Act of 1918......Page 153 IV. Litigation......Page 162 V. Revenue Act of 1921......Page 168 VI. Revenue Act of 1924 and Beyond......Page 172 CHAPTER 6. THE ORIGINS OF DOUBLE TAXATION......Page 178 I. Roosevelt’s First Term......Page 180 A. Background......Page 188 B. 1936 and the Revival of the Undistributed Profits Tax......Page 193 III. Double Taxation as a Tool in the Attack on the Undistributed Profits Tax......Page 197 A. House Deliberations......Page 198 B. Senate Deliberations......Page 204 C. Corporate Lobbying during Conference Committee......Page 214 D. The Demise of the Undistributed Profits Tax......Page 216 IV. The Survival of Double Taxation......Page 219 CHAPTER 7. THE LOST MOMENT IN CORPORATE TAX REFORM......Page 224 A. A Flurry of Tax Reform Proposals......Page 226 B. Corporate Tax Reform Deferred......Page 234 C. A Brief Revival for Reform Efforts......Page 241 A. Why Dividend Tax Relief Now?......Page 248 B. Why was Integration so Limited?......Page 259 C. What Happened to the Push for Full Integration After 1954?......Page 261 D. Integration in the Rest of the Twentieth Century......Page 267 CHAPTER 8. THE PRESENT AND FUTURE OF CORPORATE INCOME TAXATION......Page 270 A. Dividend Tax Cut of 2003......Page 272 B. President’s Advisory Panel on Tax Reform Report......Page 277 C. 2007 Treasury Conference and Rangel Bill......Page 281 II. The Future of the Corporate Income Tax......Page 286 A. The Corporate Income Tax and Dividend Policy......Page 287 B. The Corporate Income Tax and Choice of Entity......Page 291 C. Continued Global Tax Competition......Page 294 C......Page 298 D......Page 299 H......Page 300 M......Page 301 R......Page 302 S......Page 303 Z......Page 304 The U.S. corporate income tax — and in particular the double taxation of corporate income — has long been one of the most criticized and stubbornly persistent aspects of the federal revenue system. Unlike in most other industrialized countries, corporate income is taxed twice, first at the entity level and again at the shareholder level when distributed as a dividend. The conventional wisdom has been that this double taxation was part of the system's original design over a century ago and has survived despite withering opposition from business interests. In both cases, history tells another tale. Double taxation as it is known today did not appear until several decades after the corporate income tax was first adopted. Moreover, it was embraced by corporate representatives at the outset and in subsequent years businesses have been far more ambivalent about its existence than is popularly assumed. From Sword to Shield: The Transformation of the Corporate Income Tax, 1861 to Present is the first historical account of the evolution of the corporate income tax in America. It explains the origins of corporate income tax and the political, economic, and social forces that transformed it from a sword against evasion of the individual income tax to a shield against government and shareholder interference with the management of corporate funds This Historical Account Of The Evolution Of The Corporate Income Tax In America Explains The Origins Of Corporate Income Tax. Banks Shows That Political, Economic, And Social Forces Transformed It From A Sword Against Evasion Of The Individual Income Tax To A Shield Against Government And Shareholder Interference. The Roots Of A Corporate Tax -- From Industry Taxes To Corporate Taxes -- Corporate Tax At The Turn Of The Century -- The Rise Of The Separate Corporate Tax -- Nonrecognition And The Corporate Tax Shield -- The Origins Of Double Taxation -- The Lost Moment In Corporate Tax Reform -- The Present And Future Of Corporate Income Taxation. Steven A. Bank. Includes Bibliographical References And Index. "[Book title] is the first historical account of the evolution of the corporate income tax in America. [author] explains the origins of corporate income tax and the political, economic, and social forces that transformed it from a sword against evasion of the individual income tax to a shield against government and shareholder interference with the management and corporate funds."--Book jacket