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Tax Law Review

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corporate tax, equity ownership interests, shareholder tax


Law | Tax Law


Proposals for reforming the federal corporate income tax are neverending and ever-multiplying. They range from those that merely tinker around the edges, such as most recent proposals attacking the various perceived abuses that masquerade under the moniker "corporate tax shelter," to various integration approaches that arguably would gut the enterprise of a corporate income tax altogether. Since everything and the kitchen sink is at least theoretically in play, it seems appropriate to add this modest proposal, which I call the "cashless corporate tax" (CCT). As described below, the CCT is a "tax" that would replace the current corporate income tax-defined as the income tax the government currently collects directly from corporations-with government share ownership. The basic idea is that the government's current rights to corporate cash flows, as set forth in the Code, are functionally a form of equity ownership. Accordingly, it should be possible to replace such rights with direct equity ownership interests in corporations. The primary challenge is to determine the quantity and quality of the equity ownership interests, which, if held by the fisc, would most closely resemble - in whatever ways the legislature or the author deems relevant - the current corporate income tax. It is my hope that the process of meeting that challenge will lead to some insights into the nature of the current corporate income tax.

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