the Tariff Act of 1909. It imposed a “special excise tax with respect to the carrying on of doing business.” It was levied on corporations with net incomes of more than $5,000, and was described by President Howard Taft as “an excise tax upon the privilege of doing business as an artificial entity.”...
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, in 1936, with the economy still mired in the Great Depression, President Franklin Roosevelt and his congressional allies sought to abolish the corporate income tax, replacing it with a punitive tax on undistributed corporate profits. As the legal scholar Steven Bank recounted, this provoked profound resistance from businesses.
In the end, a settlement was reached: The business community defeated the proposed tax in exchange for allowing “double taxation” -- retaining the corporate income tax as well as a tax on dividends. This “ill-fated compromise,” as Bank described it, formally enshrined the idea that the same income could be taxed more than once. But it also formally divided the corporation from its shareholders when it came to taxation.
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