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TitleFrom Sword to Shield: The Transformation of the Corporate Income Tax, 1861 to Present
Author
LanguageEnglish
File Size1.5 MB
Total Pages304
Table of Contents
                            Contents
Introduction
CHAPTER 1. THE ROOTS OF A CORPORATE TAX
	I. The Early Republic and Antebellum Years
		A. The Development of the Property Tax
		B. Special Charters
		C. Industry-Specific Taxation
	II. Civil War and Reconstruction
CHAPTER 2. FROM INDUSTRY TAXES TO CORPORATE TAXES
	I. The Transition to Corporate Taxation at the State Level
		A. Breakdown of the Property Tax
		B. General Incorporation Statutes and the Spread of the Corporate Form
	II. A Federal Corporate Income Tax
CHAPTER 3. CORPORATE TAX AT THE TURN OF THE CENTURY
	I. Spanish-American War
	II. 1909
		A. Bailey-Cummins Income Tax
		B. Corporate Excise Tax
		C. Prelude to the Sixteenth Amendment
CHAPTER 4. THE RISE OF THE SEPARATE CORPORATE TAX
	I. Revenue Act of 1913
	II. Revenue Act of 1917
	III. Revenue Act of 1918
	IV. Revenue Act of 1921
CHAPTER 5. NONRECOGNITION AND THE CORPORATE TAX SHIELD
	I. Background
	II. The Push for Resolution
	III. Revenue Act of 1918
	IV. Litigation
	V. Revenue Act of 1921
	VI. Revenue Act of 1924 and Beyond
CHAPTER 6. THE ORIGINS OF DOUBLE TAXATION
	I. Roosevelt’s First Term
	II. Roosevelt’s Second Term and the Undistributed Profits Tax
		A. Background
		B. 1936 and the Revival of the Undistributed Profits Tax
	III. Double Taxation as a Tool in the Attack on the Undistributed Profits Tax
		A. House Deliberations
		B. Senate Deliberations
		C. Corporate Lobbying during Conference Committee
		D. The Demise of the Undistributed Profits Tax
	IV. The Survival of Double Taxation
CHAPTER 7. THE LOST MOMENT IN CORPORATE TAX REFORM
	I. Postwar Corporate Tax Reform
		A. A Flurry of Tax Reform Proposals
		B. Corporate Tax Reform Deferred
		C. A Brief Revival for Reform Efforts
	II. 1954 and Beyond
		A. Why Dividend Tax Relief Now?
		B. Why was Integration so Limited?
		C. What Happened to the Push for Full Integration After 1954?
		D. Integration in the Rest of the Twentieth Century
CHAPTER 8. THE PRESENT AND FUTURE OF CORPORATE INCOME TAXATION
	I. Recent Corporate Tax Reform Activity
		A. Dividend Tax Cut of 2003
		B. President’s Advisory Panel on Tax Reform Report
		C. 2007 Treasury Conference and Rangel Bill
	II. The Future of the Corporate Income Tax
		A. The Corporate Income Tax and Dividend Policy
		B. The Corporate Income Tax and Choice of Entity
		C. Continued Global Tax Competition
Index
	A
	B
	C
	D
	E
	F
	G
	H
	I
	J
	K
	L
	M
	N
	O
	P
	R
	S
	T
	U
	V
	W
	Y
	Z
                        
Document Text Contents
Page 153

120 from sword to shield

Dodge warned against “schemes of taxation [such as excess profits

taxation] which would kill the goose which lays the golden egg.” 46

Economists echoed business leaders’ displeasure with excess profits

taxation. Edwin Seligman, although a proponent of progressive taxa-

tion generally, counseled against reliance on excess profits taxation

on the grounds that “excessive taxes on industry will disarrange

business, dampen enthusiasm, and restrict the spirit of enterprise

at the very time when the opposite was needed.” 47 Adams advocated

the repeal of the excess profits tax altogether. 48 By contrast, although

some specific provisions were likely sought after and secured in part

through business’ lobbying efforts, none of the contemporary com-

mentators listing such concessions ever mentions the reorganization

provision as one of them. 49

Nevertheless, even without vocal trade group lobbying on the treat-

ment of reorganizations, it was clear that the elevated taxes had raised

the importance of addressing it. As Adams explained, “[w]hen tax

rates are low you can muddle through without much respect for the

finer equities. But when the tax rates reach 75 and 80 per cent [sic],
the inherent complexities of income taxation must be recognized, or

taxpayers will be bankrupted by the tax.” 50 This sentiment was par-

ticularly relevant in the case of the tax treatment of reorganizations

and other property exchanges, where the consequences of inaction

were to potentially chill all such transactions from going forward.

iii. revenue act of 1918

The large number of people interested in and concerned about the tax

treatment of mergers had, according to tax lawyer and World War II-era

46. Id . (quoting letters from Dodge to McAdoo, dated April 10 and 16,
1917).

47. Id . at 331.
48. Ratner , supra note 37, at 403.
49. See, e.g. , Adams, supra note 36, at 316 (citing exemptions and limita-

tions in the application of surtaxes and the excess profits taxes); Report of
Committee on Federal Taxation , 12 Proceedings of the National Tax
Association 316, 327–28 (1919) (cataloging changes made by the 1918 Act
without mentioning the reorganization provision).

50. Adams, supra note 36, at 316, 317.

Page 303

270 index

growth of during the 1920s , xxv ,
157–58

managers preference for , 157–59 ,
164–65 , 166–69 , 173–74 ,
181–82 , 183–85 , 186 , 207 ,
218 , 227–28 , 241–42 , 257

nineteenth century, limited use ,

50–51
separate tax as a means of

shielding , xxvi , xxviii , 84 ,
85–86 , 88–89 , 92–101 , 112 ,
145 , 147 , 153

surtax avoidance, and , 103–8 ,
152 , 199

undistributed profits tax as an

assault on, see Undistributed
profits tax

Revenue Act of 1913 , 84–89
Revenue Act of 1917 , 89–98
Revenue Act of 1918 , 98–103

merger and consolidation

transactions , 120–25
reorganization transactions ,

125–28
Section 202 , 128
Section 202(a) , 122
Section 202(b) , 122 , 124

Revenue Act of 1921 , 103–10
merger and consolidation

transactions , 135–38
reorganization transactions ,

135–38
Section 202(c) , 141
Section 202(c)(2) , 138

Revenue Act of 1924 , 139–43
Section 203(b)(3) , 140
Section 203(h)(1) , 139

Revenue Act of 1932 , 150
Revenue Act of 1934, reorganization

provision , 150–52
Revenue Act of 1935 , 152–53 , 168
Revenue Act of 1936 , 182–83
Revenue Act of 1938 , 185
Revenue Act of 1942 , 152

Revenue Act of 1964 , 234
Ripley, William , 50
Rockefeller v. United States (1921) ,

130–31
Roosevelt, Franklin Delano , 146–47

holding companies , 147–55
reorganization provision , 150–52
and undistributed profits tax ,

155–60
undistributed profits tax revival ,

160–63
Root, Elihu , 70 , 73–74 , 77
Ruml, Beardsley , 196–97 , 214
Ruml-Sonne report , 196–97

S
S corporations, see Subchapter S

corporations

Saez, Emmanuel , 255
Sargent, Noel , 166–67 , 189
Schram, Emil , 211
Schumer, Charles , 257
Seidman, J. S. , 210
Seidman, M. L. , 172
Seligman, Edwin , ix , 34 , 54–55 ,

120–21
Seltzer, Lawrence , 123–24
Senate Finance Committee , 48–49 ,

72 , 87 , 93 , 94 , 100 , 101 , 138 ,
174–75 , 180

Shackelford, Douglas , 255
Share repurchases or redemptions ,

87 , 240 , 242 , 250 , 256 , 257
Shearman, Thomas , 40 , 42 , 47
Shelters, Corporate Tax , xvii , xix ,

xxiii , xxvi , xxix , 237 , 246
Sherman, John , 19–20
Shoup, Carl , 196 , 198–99 , 201 , 225
Simmons, Furnifold , 92–97 , 107
Simplified Income Tax Plan , 245
Sixteenth Amendment

prelude to , 80–81
ratification of , 81 , 83–84

Sloan, Alfred , 181

Page 304

index 271

Small business tax reform , 230–33
Smith, Dan Throop , 225
Sonne, Hans Christian , 196–97
Spanish-American war , 58–62
Special charter system , 5–8 , 14
Spreckels Sugar Refining Company v.

McClain (1904) , 61
Spooner, John , 59–60
State property tax , 1 , 13 , 41
State level corporate taxation , 26–40

property tax breakdown , 26–34
corporations spread , 34–40
general incorporation statutes ,

34–40
Stoneham, Horace , 185
Story, H. W. , 173
Subchapter K , 233
Subchapter R , 231–33
Subchapter S corporations

definition and eligibility , 258–59
number of S corporations , 258–59
origins , 233

Sutton, Willie , 42

T
Taft, William Howard , xvi , 62 ,

66–70 , 77 , 79
Tariff Act of 1913 , 85
Tariffs , 12 , 40–42 , 47 , 52 , 58 , 62 , 66 ,

72 , 75 , 79 , 80 , 84
Taussig, Fred , 95
Tax Reform Act of 1986 , 235 , 246 ,

248–49
Truman, Harry , 208–9 , 219–20
Tugwell, Rex , 156 , 158
Twin Cities plan , 197–98 , 203

U
Undistributed profits tax , 21 , 86–87 ,

95–96 , 106 , 155–60 , 176–77
Conference Committee, corporate

lobbying during , 181–83

criticism of , 87 , 94
demise , 183–85 , 192 , 194
and dividends , 48–49
double taxation as tool in attack

on , 164
and Roosevelt, Franklin Delano ,

155–63
House deliberations , 165–71
partnership-style taxation , 87
pass-through taxation on , 105
Senate deliberations , 171–81
types of , 106–7

Undivided profits tax , 86–88
U.S. Chamber of Commerce , 174 ,

200–202

V
Van Allen v. Commissioner (1865) ,

16–17
Vinson, Fred , 201

W
Walters, G. L. , 167 , 177 , 180
Wells, David , 44–45
Wickersham, George , 77 , 79
Williams, John Sharp , 85 , 88–89
Wilson, William L. , 43 , 47
Winston, Garrard , 141
Wisconsin State Tax Commission ,

55
World Trade Organization , xiv

World War I , xiv , 116 , 139 , 159
World War II , xviii , xxix , 192 , 201 ,

209 , 212 , 230 , 236 , 239 , 242

Y
Yearley, C. K. , 26

Z
Ziffren, Paul , 233–34

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