Corporation Tax and the Harberger General Equilibrium Model

-A corporation is an organizational form that is a legal entity that declares the business as separate and distinct from its owners. It is directed by the board of directors who act as a single entity.

Income Taxes: The Corporation pays both state and federal taxes on its earnings. Excess earnings may be shared with stockholders in the form of dividends, on which the stockholder then pays taxes.

With the advancements in the globalization of the economy, corporations are finding more ways to avoid the extraordinary tax rates set in place of The United States Of America. With the loss of revenue from large companies dodging taxes the government must make up for the loss by either raising taxes or changing the tax code. A recent company to avoid american taxes is Johnson Controls, a company that “…would not exist as it is today but for American taxpayers, who paid $80 billion in 2008…”(The Editorial Board). This use of American resources to get through tough times, and run to another county during an economic incline is an act that calls for reform in the American tax system. However congress has not passed any legislation to fix the

To sum it up, lowering taxes of big corporations has a very big impact on the wages of the workers and the benefit they get.

More than 25 years ago, there was a major overhaul of the U.S. corporate tax system. The Tax Reform Act of 1986 reduced a corporate tax rate from 46 percent to 34 (Gross & Schadewald, 2012, p. 40). The federal budget deficit forced the government to lower the corporate tax rate. The level of corporate tax rate in the USA was lower than it was in Canada, Germany, and France. The tax rate for corporations remained unchanged until 2011. In 2011, fiscal barriers led to changes of the tax reform. Today, the reform package includes the exclusion of deductions and credits, and tax rate reduction. However, the net effect of those components may boost the tax liability of domestic companies.

In response to the need, the Tax Reform Act of 1986 was enabled. The reform was intended to be revenue neutral, but broaden the tax base previously held. Congress had depressed marginal rates, and concurrently got rid of tax shelters, tax preferences, and other opportunities for tax avoidance. It now seems what worked as great solution in the past is not working now, “The Tax Reform Act of 1986 has not proved a stable outcome: Congress has since narrowed the tax base and raised income tax rates. Internationalization of the economy raises the question of whether corporate income taxes can be relied upon as a stable source of revenues. Moreover, the tax system is also under continual reexamination because federal deficits of $300–$400 billion a year are now commonplace…” (Greatz, 2007, p.

Today’s economy was founded upon the fundamentals of capitalism and continues to find its strength in the presence of freedom of enterprise and trade. Regulation and taxes are vital in order to support fairness amongst businesses and to provide funds for the government to develop and maintain the country’s infrastructure. Most companies distribute some of the company’s accumulated profits, so that is why it is important to characterize the distribution under whether it

It is confusing who actually bears the burden of the corporate income tax. Ordinary people believe, incorrectly, that it is paid by corporations, while owners and managers of corporations often assume, just as incorrectly, that the tax is

A corporation is a legal entity designed to shield its owners from liability claims brought against it, as long as they maintain a separation from the entity (Legal-Dictionary.com, 2015). The co-mingling of Drizins’ personal funds into

The Republican administration of Donald Trump presented an ambitious tax reform, making emphasis in a strong tax cut for individuals and companies, this is just a proposal for now, in what anticipates a long and never-ending debates in the Congress to get the approval. Examining how changes to individual and companies tax will affect long-term economy grows. The structure of such changes is critical to achieve what in the future could bring economic growth, the ultimate purpose of any government in the world. This work will try to analyze the pros and cons, consequences for our country and abroad, and finally have the criteria if this is viable for our economy, showing some statistics and graphics for a better

Domestically, corporate taxes are a significant expense to businesses, so much so that corporations pour massive resources toward acquiring the knowledge to take advantage of not only their local tax system, but also international ones, in order to preserve as much capital as possible. As businesses attempt to attain wealth, they mobilize towards lower-tax jurisdictions. Organizational planning is also affected, as uneven taxes on different types of business entities lead companies like Enron to form network webs of varying entities (Luna, LeAnn, and Murray 2008). Resource allocation to operating tax loopholes and allowances may be considered uneconomic, but is crucial for business survival. Domestic corporate tax rates are also inherently political; as each party has differing mandates towards tax revenue generation and allocation. Governments now must consider tax policy one of the major pieces to their platform. In Canada, the Conservative Party of Canada has stressed the importance of the corporate tax rate as a vital cog in maintaining the health of the economy. Over the last 4 years, the Conservative Party has decreased the net corporate tax rate by 2.5% with intention to lower it further to 15% effective January 1, 2012 (Canada Revenue Agency 2011).

Should the flat tax rate system be implemented? No, the flat tax rate system should not be implemented. In this paper, the pro arguments will be presented, which will affirm the thesis. Then the con arguments will be presented. A rebuttal will then follow, and finally, the author’s conclusion will be offered.

Chapter V: Taxes Discourage Production – Taxing a corporation for every dollar it gains as well as when it cannot balance its losses against its gains affects it’s policies. It does not expand its operations or it expands only those attended with a minimum chance of risk. People who recognize this situation are deterred from starting new corporations. Therefore old employers do not hire more employees, or not as much as they might have; and others decide not to become employers at all. Improved machinery and better-equipped factories are much more slow to come into existence than they could have. The long-run result is that real wages are held down while consumers are prevented from getting better and cheaper products. There is a similar effect

The United States is in a recession; it has been facing some of the worse economic times since the Great Depression in the 1930’s. One option to fix the economy is to change the corporate tax rate. To lower it or to raise it, that is the question economists have been speculating. America's high corporate tax rate and worldwide system of taxation discourages U.S. companies from sending their foreign-source revenue home, which makes U.S. companies defenseless to foreign acquisition from the international opponents (Camp). Corporations and United States citizens have been fighting for a tax reform, which would hopefully help the American economy; either by lowering the corporate tax, or by raising the tax.

Corporation origin from the Latin word Corpus which means body. It is formed by a group of people and has separate rights and liability from those individual. In any means, corporation exists independently from its owner and this principle is called the doctrine of separate personality. Doctrine of separate personality is the basic and fundamental principle in a Company Law. This principle outline the legal relationship between company and its members. Company’s assets belong to the company not the shareholders as assets are the equity for creditors. Company must use up all its assets to pay off the creditors if it became insolvent. The same applies to the corporation’s debts. For limited liabilities company, the shareholder liability is limited which means that the shareholder is restricted to the number of shares they paid and not personally liable for the corporation’s debts. If the company does not have enough equity to pay off debts, the creditors cannot come after the shareholders. However, limited liability company can be very powerful when in hands who do fraud and on defeating creditors’ claims. Courts then can ignore the doctrine for exception cases and lifting the corporate veil. Lifting the corporate veil is a situation where courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s debts.