History of Corporate Income Tax

The Brooklyn Law School Library’s most recent New Books List has 69 items on a wide range of legal topics. From Sword to Shield: The Transformation of the Corporate Income Tax, 1861 to Present by Law UCLA Law Professor Steven A. Bank (Call #KF6464 .B36 2010). An absorbing read for those with an interest in tax and those interested in the legislative process or in economic history, the book is the first historical account of the evolution of the corporate income tax in America. The author explains the origins of corporate income tax and the political, economic, and social forces that transformed it from a sword against evasion of the individual income tax to a shield against government and shareholder interference with the management of corporate funds. The 304 page volume has chapters titled The Roots of a Corporate Tax; From Industry Taxes to Corporate Taxes; Corporate Tax at the Turn-of-the-Century; The Rise of the Separate Corporate Tax; Non-recognition and the Corporate Tax Shield; The Origins of Double Taxation; The Lost Moment in Corporate Tax Reform; and The Present and Future of Corporate Income Taxation.

The U.S. corporate income has long been one of the most criticized and stubbornly persistent aspects of the federal revenue system. Unlike other industrialized countries, corporate income in the U.S. is taxed twice, first at the entity level and again at the shareholder level when distributed as a dividend. The conventional wisdom has been that this double taxation was part of the system’s original design over a century ago and has survived despite withering opposition from business interests. In both cases, history tells another tale. Double taxation as we know it today did not appear until several decades after the corporate income tax was first adopted. Moreover, it was embraced by corporate representatives at the outset and in subsequent years businesses have been far more ambivalent about its existence than is popularly assumed.