Report of the Department of the Treasury on Integration of the Individual andCorporate Tax Systems. Taxing Business Income Once

摘要

The current system of taxation distorts corporate financial decisions, inparticular by encouraging debt and discouraging new equity financing of corporate investments. The tax system also prejudices corporate decisions about whether to retain earnings or pay dividends and encourages corporations to distribute earnings in a manner to avoid the double-level tax. Integration of the individual and corporate tax system would tax corporate income once and reduce or eliminate these economic distortions. Most trading partners of the United States have integrated their corporate tax systems. The potential economic gains from integration are substantial. The report examines in detail several different integration prototypes, although it does not attempt an exhaustive discussion of all possible integration systems or of all the technical issues raised by the alternative prototypes.