Steven A. Bank


The United States is unique in subjecting corporate income to two layers of tax. In what is called a "classical system," corporate income is taxed once at the entity level when earned and a second time at the individual level when distributed to shareholders in the form of a dividend. By contrast, in most other countries, corporate- and shareholder-level taxes are fully or partially integrated through some form of credit or deduction. America's double taxation of corporate income is a much-criticized but persistent feature of its current tax system despite numerous reform proposals over the last half-century or so. Here, Bank discusses why dividend-tax relief was so long in coming, given the initial momentum for reform and determines what led dividend-tax reform to rise to the top of the agenda in 1954.

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