Since individuals pay income tax on dividends that are paid out of

after-tax profits made by corporations, corporate profits are taxed

twice.

a. Is the corporation income tax horizontally equitable?

(To answer this, assume the income and corporate tax rates are 30

percent and two businesses, one a corporation and the other not,

both make $100,000.)

b. Is it vertically equitable?

c. Is it justified under the ability-to-pay argument if capital is in

perfectly elastic supply to the United States?