Tax experts Robert Goulder, Steven Rosenthal, and Livia Mucciolo from the Urban-Brookings Tax Policy Center discuss the decreasing shareholder tax base and its implications for tax policy. They highlight the fact that the percentage of taxable shareholders has dwindled over time, with foreign investors and retirement accounts being the largest groups of nontaxable shareholders. This trend has significant implications for the taxation of dividends and capital income.
The authors aimed to address the question of who is left to tax in their article “Who’s Left to Tax? Grappling With a Dwindling Shareholder Tax Base.” They found that the percentage of taxable shareholders has dropped significantly from around 80 percent 60 years ago to about 27 percent today. The rise in foreign ownership has been a major factor in this trend, leading to challenges in taxing corporate shareholders effectively.
Their research aims to unravel the complexities of shareholder taxation and provide transparency in their methodology. By analyzing the data, they hope to shed light on the true extent of nontaxable shareholders and encourage readers to engage with the data. They provide detailed tables and explanations in the appendix of their article, allowing for a deeper understanding of the implications of the decreasing shareholder tax base.
The implications of the decreasing shareholder tax base are significant for tax policy, especially in light of recent corporate tax cuts like the Tax Cuts and Jobs Act. The authors argue that these tax cuts have disproportionately benefited foreign investors and have not lived up to the “America First” fiscal policy rhetoric. They highlight the need to reevaluate tax policies to ensure that they are fair and effective in capturing tax revenue from businesses operating in the U.S.
When considering entities like passthroughs and the prevalence of stock buybacks, the authors suggest that taxing business entities at the shareholder level may be a more effective approach. They propose measures such as a withholding tax on corporate distributions to foreign investors and a credit for taxes paid at the corporate level. These changes could help address the challenges posed by the decreasing shareholder tax base and ensure a more equitable tax system.
Overall, the research by Rosenthal and Mucciolo underscores the importance of reevaluating tax policies to address the challenges posed by the decreasing shareholder tax base. By providing transparency in their methodology and outlining potential solutions, they aim to stimulate discussions on how to better tax dividends and capital income in a way that is fair and effective. Their work contributes to a deeper understanding of the complexities of shareholder taxation and the implications for tax policy moving forward.
