A MERE CATALOGUE of the various headings under which the responses of individuals to high rates of corporate and personal income taxation might be analyzed would be larger than this paper. The briefest summary of all that has been conjectured on this same general problem would take up several volumes. Smaller would be the space required for a review of the established facts. It is this consideration that justifies our paper. For in a meager and modest way its findings fall in this latter category, with due recognition, of course, of the qualified nature of facts when discussing behavior. No analytical insights or play of powerful imagination will be set before you. Rather, I shall concentrate on the most direct and prosaic of responses to high tax rates, and even that in connection with a relatively small number of taxpayers. More specifically, this paper deals with the underreporting of dividends for tax purposes by examining the amount and, more particularly, the percentage of aggregate dividend receipts that cannot be accounted for on tax returns. It summarizes the evidence bearing on this matter with reference, initially, to two questions: (1) How important is the underreporting of dividends? (2) What has been the trend in dividend reporting on tax returns, i.e., has stockholders' zeal in reporting their dividend receipts varied in response to changes in tax rates?

Reviews the book "Effects of Taxation: Corporate Mergers," by J. Keith Butters, John Lintner and William L. Cary.

This paper is a progress report on our effort to measure and analyze the profitability of U.S. corporations over the postwar period. We are particularly interested in comparing the behavior of manufacturing corporations (MC) to that of the larger aggregate of all nonfinancial corporations (NFC). We analyzed NFCs in an earlier paper using data from both capital markets and the National Income and Product Accounts (NIPA). This paper's approach is basically the same.' Rates of return derived from the NIPA are solid, useful numbers. However, we believe the capital market data are essential. A decline in the real rate of return on capital does not make investors worse off or weaken the incentive to invest if the real cost of capital declines proportionally. Also, an independent measure of rate of return can be obtained from returns realized by investors in debt and equity securities. If the only object were to measure corporate profitability, we believe market rates of return would be superior to the NIPA figures. However, both types of data are needed to investigate the determinants of profitability and to assess profitability relative to the cost of capital.