Research Report The Administration's Proposal to Cut Dividend and Capital Gains Taxes
William G. Gale, Peter Orszag
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In the United States, some corporate income is never taxed, some is taxed once (either at the individual or the corporate level), and some is taxed twice. Many economists-ourselves included-would prefer a system that taxed all corporate income, but taxed it once and only once, at non-preferential tax rates. In this paper, we focus on two crucial dimensions of corporate incentives affected by the tax system: the incentive to shelter corporate income from taxation and the incentive to retain corporate earnings rather than pay dividends.