The Top Total Income Tax Rate on Corporate Profits, 1913-2011

Research Report

The Top Total Income Tax Rate on Corporate Profits, 1913-2011

June 7, 2011

Abstract

Corporate profits are taxed under both the corporate and individual income taxes. The total income tax rate on corporate profits therefore depends on the corporate rate and the individual rates on dividends and capital gains, as well as on the share of after-tax profits corporations pay as dividends, the share of stock held in retirement and other nontaxable accounts, and the timing of capital gains realizations. To illustrate how these factors determine the total income tax rate on corporate profits, I made assumptions about corporate distributions, stock holdings in tax-favored accounts and patterns of capital gains realizations, and applied those factors to the top corporate and individual rates on dividends and capital gains over the 1913-2011 period (see graph)

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