Among the many proposals for fundamental tax reform is the recommendation to integrate corporate and personal taxation, usually called the comprehensive business income tax. Describe the basic idea behind this proposal, to whom it would apply, and the two reasons that proposal advocates give for the need for a change in the tax system. Compared to other proposals, explain whether or not you believe that this technical recommendation would be a beneficial change to the tax code.

Question

What will be an ideal response?

Answer 1

The basic concept behind the comprehensive business income tax is that “if most income earners in the United States work for some sort of organization, then those organizations, rather than the individual citizens they employ, would make the tax filings. Individual wages might be taxed, but the tax revenue could be collected at the source, leaving primarily the self-employed having to make individual filings.” The two reasons that advocates give for the need for a change in the tax system are (1) to make tax administration easier and (2) to improve the economic consequences of the tax structure, namely, to rid the system of double taxation, which is thought by some to deter investment. Integration of personal and corporate taxation would facilitate investment and savings. Justification as to whether the student believes this recommendation would be a beneficial change will depend on their referent tax reform and may take many forms.