Tuesday, March 17, 2009

Time for a Real Change: Repeal the Corporate Income Tax

by Karen Campbell, Ph.D.

Backgrounder #2248

Entrepreneurs are among America's greatest resources. These individuals try to change the status quo because they expect to use resources to create higher value than those resources are currently pro­ducing. This takes investments, and investments are risky. The return to these investments is the economic growth that they create, which is profit. Yet the gov­ernment often taxes these profits twice, once at the business level and then again when the profits are distributed to individuals.

This double taxation not only dampens the incen­tive to invest, but also obscures who actually bears the burden of these taxes. Corporations are often per­sonified and demonized, but a corporation is a legal entity, not an actual person. Because a corporation is made up of a group of individuals but is not actually an individual, corporate taxes are really taxes on the stakeholders in the corporation. In a U.S. Treasury report, William Gentry points out that empirical studies show that employees and consumers really bear the cost of corporate and investment taxes.[1]

 

http://www.heritage.org/Research/Taxes/bg2248.cfm

 

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