The American Law Institutes Reporter's Study of Corporate Tax Integration: A Critique
GEORGETOWN UNIV WASHINGTON DC
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The United States has long followed the so-called classical system of corporate equity taxation. Earnings of the corporation are taxed once at the corporate level and after-tax earnings of the corporation are generally subject to a second shareholder level tax. The shareholder tax may be levied close in time to the corporate level tax as in a dividend distribution made form current earnings and profits. Alternatively, the corporation may retain its after-tax earnings for a extended period resulting in stock value appreciation. The shareholder level tax is thus deferred until such time as the shareholder realizes a capital gain on sale or exchange of the appreciated stock. The time has come ... for the development of a complete legislative proposal for integration of the individual and corporate income taxes. It would be regrettable if the American Law Institute ... were not a full participant in the debate ... Twelve years later, despite substantial scholarly debate, discussion in non-legal mainstream periodicals, and general acceptance of corporate integration as a good thing in the abstract, the United States is no closer to implementation of any integration system than it was in 1981.
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