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Tax laws favor large businesses over small ones, a series of studies prepared for the Federal Trade Commission conclude. The present tax structure encourages financing through retention of earnings -- a situation that favors existing enterprises over new ones, the authors say, since new corporations will not have earnings retained from a previous period. And tax provisions such as depreciation deductions and investment credits "confer their benefits disproportionately by size" -- i.e., big corporations derive more benefit per dollar of net income than small businesses. The authors recommend a general reduction in the corporate tax rate, rather than liberalized depreciation or investment credits.

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