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    Eliminating corporate tax affecting excess burden

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    Suppose the corporate income taxes were eliminated and corporate income was allocated to shareholders on a pro rata basis according to their proportion of outstanding stock. How would such a change in tax policy affect the excess burden and incidence of the tax, assuming that all forms of investment income are included in a comprehensive income tax base?

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    If the corporate taxes were eliminated and corporate income tax was allocated on a pro rata basis to shareholders, the company would be more likely to reinvest any possible dividend payouts based ...

    Solution Summary

    This solution discusses the consequences of corporate income taxes being eliminated and allocated pro rata to shareholders. I discuss how a chance like this would affect the excess tax burden and incidence of tax under the assumption that all forms of investment income are included in the comprehensive income tax base.