The Concise Encyclopedia of Economics
FEATURED ARTICLE

Corporate Taxation

Rob Norton

The corporate income tax is the most poorly understood of all the major methods by which the U.S. government collects money. Most economists concluded long ago that it is among the least efficient and least defensible taxes. Although they have trouble agreeing on--much less measuring with any precision--who actually bears the burden of the corporate income tax, economists agree that it causes significant distortions in economic behavior. The tax is popular with the person in the street, who believes, incorrectly, that it is paid by corporations. Owners and managers of corporations often assume, just as incorrectly, that the tax is simply passed along to consumers. This very vagueness about who pays the tax accounts for its continued popularity among politicians.

The federal corporate income tax differs from the individual income tax in two major ways. First, it is a tax not on gross income but on net income, or profits, with permissible deductions for most costs of doing business. Second, it applies only to businesses that are chartered as corporations--not to partnerships or sole proprietorships....

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FEATURED ARTICLE

Taxation

Joseph J. Minarik

In recent years, taxation has been one of the most prominent and controversial topics in economic policy. Taxation has been a principal issue in every presidential election since 1980--with a large tax cut as a winning issue in 1980, a pledge of "Read my lips: no new taxes" in the 1988 campaign, and a statement that "It's your money" providing an enduring image of the 2000 campaign. Taxation was also the subject of major, and largely inconsistent, policy changes. It remains a source of ongoing debate....

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Environmental Quality

Terry L. Anderson

Pollution Controls

Robert W. Crandall

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John C. Goodman

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FEATURED BIOGRAPHY

Robert Lucas

(1937-)

Robert Lucas was awarded the 1995 Nobel Prize in economics "for having developed and applied the hypothesis of Rational Expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy." More than any other person in the period from 1970 to 2000, Robert Lucas revolutionized macroeconomic theory. His work led directly to the pathbreaking work of Finn Kydland and Edward Prescott, which won them the 2004 Nobel Prize.... READ MORE