Coase-Sandor Working Paper Series in Law and Economics

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Law & Economics Working Papers


This paper argues that firm-level income taxes have an irreducible core of complexity, stemming from the ability to hold and sell an asset in two ways: directly and through the stock of a subsidiary. Both methods of selling must be taxed but coordinating the tax at each level, stock and assets, leads to complexity and line drawing. There are two implications. First, much of the doctrinal rules found in the current corporate tax can be explained through this overarching framework. Second, reform proposals will not be able to eliminate the core of complexity. The Comprehensive Business Income Tax is used as an example: the paper argues that it will inevitably have much of complexity associated with the current corporate tax.



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