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Is the corporate tax schedule progressive? Why or why not?

The question of whether the corporate tax schedule is progressive has always been debatable. According to Frecknall-Hughes (2014), a corporate tax is a tax imposed on a company’s net income while a progressive tax is the one in which average tax rates increases with an increase in the taxable income Therefore, progressive tax is based on the ability of the taxpayers to pay whereby the rich pay higher than the poor. Considering that the burden of corporate tax mainly falls on the rich who are the owners, there is an argument that it is progressive. However, whom the tax is imposed on does not necessarily end up paying the tax because it may be passed on to another person. 

Although a corporate officer files the tax returns, the money comes either from the capital owners or the workers. Therefore a corporate tax that leads to lower capital returns is considered as progressive while the one that leads to lower wages is regressive (Frecknall-Hughes, (2014). In other words, a corporate tax is either progressive or regressive depending on where the incidence falls. The reason behind the assumption is that capital is impacted by the shareholders who are a class of rich people taxed according to their income level. Also, a corporate tax having an impact on the worker’s wages means that workers are contributing to the tax making it regressive. Nevertheless, corporate tax is generally progressive because whether it falls more on the workers of the capital owners, it is still disproportionately paid by wealthier people.

Reference

Frecknall-Hughes, J. (2014). The theory, principles, and management of taxation: An introduction. Routledge.

by EssayRoyal, Dec. 7, 2019, 7:02 p.m.

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