Why we have tax problems and what to do about them;

              Why we have tar
and wh?
The progressive features of the Federal individual income tax are
well publicized. These of course affect partnerships and fiduciaries as
well as individuals, since the income of all of these entities is eventual­ly
taxed at individual rates. The corporation income tax is also more
progressive than is probably generally realized. The greater import­ance
of the $25,000 surtax exemption to the smaller corporations, and
other factors such as minimum accumulated earnings credits tend to
make the impact of the corporate income tax much more severe on
the corporations with larger earnings.
All of this emphasis on progressive rates means that tax problems
really arise when one entity has a large amount of ordinary income.
Lowering these progressive rates then becomes a matter of having
more taxable entities, having the income taxed to the most advan­tageous
entities, or using statutory advantages, such as tax exempt
income, capital gain rates, etc. Before discussing in detail methods of
paying tax at lower rates, however, we should consider the importance
of deferring the payment of tax.
Deferral of Tax
The first preference of any taxpayer would be to pay no tax at all.
The only legal way I know to accomplish this, however, is to have no
18 THE QUARTERLY