As corporate income tax rates have fallen across the world, other capital taxes become more important. This paper studies the choice between income taxation at the corporate and shareholder level depending on capital market openness. I develop a model of capital markets and sufficient-statistics framework to determine optimal tax reforms. The main result is that when the incidence of the corporate income tax on workers is higher than that of shareholder income taxes, lowering the former and reducing the latter is typically optimal. In a policy application, I derive optimal reform directions for corporate and shareholder income taxes for a large and a small economy.