Volume 95
Managers, Shareholders, and the Corporate Double Tax
The United States generally imposes two levels of federal income tax on corporate profits. The first level taxes income to the corporation; the second level taxes dividends to the shareholders. Academics and policymakers have long considered this double tax to be “unusual, unfair, and inefficient.” Legislators from both political parties have proposed integration of the corporate and individual income taxes on many occasions, but the proposals consistently fail. Prior academic analyses have struggled to explain the failure of integration. This paper demonstrates how certain managers, shareholders, and collateral interests rationally favor certain integration proposals and oppose other integration proposals, while other managers, shareholders, and collateral interests rationally adopt contrary positions. The substantial heterogeneity of interests among managers, shareholders, and collateral interests generally accounts for the stubborn persistence of the double tax. Close examination of the lobbying positions taken by managers, shareholders, and collateral interests in response to the Bush Administration’s dividend-exclusion proposal establishes that the heterogeneity of interests directly shapes the legislative process and definitely affects legislative outcomes. The argument presented here implies that, as a political matter, the corporate double tax is much more entrenched than most prior analyses assume.
The Common Law Prohibition on Party Testimony and the Development of Tort Liability
For two and a half centuries of accident law’s history, between about 1600 and 1850, neither the plaintiff nor the defendant in a tort suit could testify in that suit. In fact, during this period the parties could not testify in any civil suit, and the defendant could not testify in a criminal case. These prohibitions were features of a broader common law rule providing that any potential witness who had an “interest” in the outcome of a case was not competent to testify in it. It was not until statutes abolishing this evidentiary prohibition were enacted in England in the 1840s, and in the United States between the late 1840s and the 1890s, that the parties were permitted to testify in tort (and other) suits. This Essay addresses the influence of the prohibition against party testimony on the development of tort liability prior to the middle of the 19th century.