Corporations, Society, and the State: A Defense of the Corporate Tax

This article attempts to provide the first comprehensive rationale for defending the current corporate income tax. It argues that the usual reasons given for the tax (primarily as an indirect way of taxing shareholders, or alternatively as a form of benefit tax) are inadequate. It then explains what the original rationale to adopt this tax was in 1909, namely to regulate managerial power, and that this rationale stems from the “real” view of the corporation, which was the dominant view throughout the many transformations underwent by the corporate form from Roman times to the present. Turning to normative argument, the article then argues that the regulatory rationale given for taxing corporations in 1909 is still valid, since similar social conditions continue to exist, and in fact is strengthened by the rise of multinational enterprises. Finally, the article argues that this rationale is necessary from a normative perspective to support the fight against the two crucial current threats to the corporate tax posed by the corporate tax shelter and tax competition phenomena. 1 Irwin I. Cohn Professor of Law, the University of Michigan. B.A. (History), Hebrew University, 1983; Ph.D. (History), Harvard University, 1986; J.D., Harvard Law School, 1989. I would like to thank Steve Bank, Michael Barr, Suzie Blumenthal, Yariv Brauner, Bruce Frier, Tom Green, David Hasen, Don Herzog, Jim Hines, Doug Kahn, Marjorie Kornhauser, Rich Lavoie, David Lenter, Kyle Logue, David Schizer, Joel Slemrod, and participants at workshops at Columbia, Michigan, and Northwestern Law Schools.