Catherine Rampell concluded her Aug. 22 op-ed column, “How about baring it all on taxes?,” by arguing for shaming Congress for “creating, and perpetuating, our terrible, convoluted, loophole-riddled tax system in the first place.”
In 1936, when Henry Morgenthau Jr. was treasury secretary, we had lawyers and outstanding economists in the Treasury Department. They reasoned that, since corporate shareholders were technically the owners of the corporation, the profits of the corporation were actually income to the shareholders and should be taxed as such, using the rates appropriate to individual shareholders by inducing corporations to distribute essentially all of their profits as dividends to the shareholders. The corporate income tax would apply only to profits not distributed as dividends.
Since in those days the tax rates for people with large incomes were significantly higher than the corporate rate, this would have increased federal revenue and reduced the taxes paid by corporations. Unfortunately, Congress messed up the implementation, and the system did not catch on.
Bruce Herbert, McLean