This paper provides a theory of incorporation and taxation that emphasizes the role of the corporate legal form in facilitating access to external capital and the potential advantages of limited liability. Incorporation relaxes financing constraints and makes corporations larger than comparable...

This paper discusses alternative transition strategies of moving towards an S-base cash-flow business tax. While the tax has attractive neutrality properties, moving from the current situation towards the new system often involves a stark trade-off between short-run losses and long-run gains. We...