SOURCES OF ADDITIONAL REVENUE 315

(2) change of the personal income tax rate from the flat
rate of 19, to (a) 1% on the first $4,000 of taxable income,
(b) 2%, on the taxable income between $4,000 and $20,000,
(c) 39%, on the taxable income in excess of $20,000; and (3)
a flat rate of 3% on taxable income derived from intangibles.
If intangibles are exempted from the general property tax,
a rate of 39 or higher on the income would seem to be justifiable.
 In administering the tax, income from intangibles
would be deducted for the purpose of computing the tax on
other income, and the tax on income from intangibles would
be computed separately.
It is generally accepted that the rates on corporation income
 should not be progressive. Two states, Wisconsin and
Mississippi, however, levy an income tax at progressive rates
on corporations. The principal argument against progressive
rates on the income of corporations is that the natural or
representative size of a corporatoin varies according to the
type of business and the kind of product manufactured.
There is no sound reason why any part of a $200,000 income
earned by a corporation that manufactures a metal product
should be taxed at a higher rate than a $20,000 income earned
by a small corporation that manufactures jewelry. There
is a natural difference in size and capitalization, and the
levy of an income tax at progressive rates merely assumes
that the ability to pay or the benefit obtained increases at a
rate that is more than proportionate to income. Of course,
it might be contended that many small corporations differ
very little from businesses conducted by partnerships or
sole proprietors, and that the progressive rates make allowances
 for this similarity. The similarity probably exists,
but it does not follow that progressive corporation income
tax rates represent a proper method of recognizing it. An
exemption of a part of the income of corporations that do
not earn more than a certain maximum income probably
represents a more equitable method of accomplishing the
desired result.
Progressive rates for personal income taxes may be justified
 on fiscal and social grounds. Most of the states that
levy personal income taxes have adopted progressive rates,
and the same is true of the Federal Government. Also the