History of Corporate Income Tax, People Pay Taxes

Even before the personal income tax started in 1913, corporate income was taxed starting in 1909, at an initial rate of only 1% on income over $5,000, equivalent in today's dollars to about $113,000 of tax-exempt business income.

Until 1931, some amount of corporate income was tax-exempt - $2,000 or $3,000 in most years, equivalent in today's dollars to $45,000-$68,000 of non-taxable income. By 1932, tax-exempt corporate income was eliminated forever, and all business income gets taxed, starting with the first dollar of income. Also, by 1932 the corporate tax rate was up to 13.75%, having been increased gradually over the years from its original 1% level in 1909.

Myth: Corporations pay taxes.

Reality: Corporations really don't pay any taxes at all; people pay all taxes, in our roles as customers, workers and shareholders. In other words, higher taxes on corporations mean either higher prices for a corporation's customers, lower wages for its workers, or lower dividends for its shareholders, or all three.