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The increase in international capital mobility over the past two decades has put pressure on the tax treatment of corporate equity income. Corporate-level taxes distort investment flows across locations and create opportunities for tax avoidance by shifting income across jurisdictions. This paper explains why there may be both efficiency gains and increases in progressivity from shifting taxes on corporate equity income from the corporate to the shareholder level. We estimate that taxing capital gains and dividends as ordinary income could finance a substantial cut in the corporate tax rate and make the tax system more progressive.




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