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Journal Article

Replacing Corporate Revenues with a Mark-to-Market Tax on Shareholder Income

  • Alan Viard
Eric Toder, Alan Viard
September 1, 2016
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Abstract

We propose reducing the corporate tax rate to 15 percent and replacing the foregone revenue with a tax at ordinary income rates on the accrued, or mark-to-market, income of American shareholders of publicly traded corporations, accompanied by an imputation credit for U.S. corporate income taxes paid. The proposal would dramatically reduce the tax significance of the source of corporate profits and the residence of corporations, both of which can be easily manipulated. Lowering the corporate tax rate to 15 percent would encourage a flow of capital into the United States and reduce incentives to shift reported profits overseas and to engage in inversion transactions, while continuing to impose tax on foreigners who earn economic rents from investing in the United States. The proposal includes provisions for averaging of mark-to-market income, transition relief for firms that move from closely held to publicly traded status, and other measures to address the challenges of mark-to-market taxation. We estimate that the proposal would be approximately revenue-neutral and would make the distribution of the tax burden slightly more progressive. This paper was updated on April 3, 2019 to correct transcription errors in Tables 1 and 3.

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Federal Budget and Economy
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Meet the Experts

  • Eric Toder
    Institute Fellow and Codirector, Tax Policy Center
  • Alan Viard
    Alan Viard
    Resident Scholar, American Enterprise Institute
Research report

New Evidence on The Effect of The TCJA On the Housing Market

Robert McClelland, Livia Mucciolo, Safia Sayed
March 30, 2022
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