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  • 2021
  • Working Paper

The Incidence of the Corporate Income Tax Is Irrelevant for Its (Benefit-Based) Justification

By: Matthew C. Weinzierl
  • Format:Print
  • | Language:English
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Abstract

Robust support for corporate income taxation is a puzzle for standard tax theory because the tax’s incidence is uncertain and unreliable. We propose a resolution: if the corporate tax is seen as a benefit-based tax, its normative appeal depends on the correspondence between its incidence and that of the benefit which corporations derive from the state’s activities. We show that a simple mechanism makes this correspondence exact—and the net incidence of the tax zero—when the tax base matches what we call the benefit base. As a result, the appeal of the corporate income tax is independent of incidence as conventionally understood.

Keywords

Corporate Income Tax; Benefit-based Taxation; Business Ventures; Taxation

Citation

Weinzierl, Matthew C. "The Incidence of the Corporate Income Tax Is Irrelevant for Its (Benefit-Based) Justification." NBER Working Paper Series, No. 29547, December 2021.
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About The Author

Matthew C. Weinzierl

Business, Government and the International Economy
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