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I still don’t understand corporate income taxes. These are just pass through entities. All the money goes to actual people which are a lot easier to tax than a

• PrimalDual 7y ago
  I also forgot to mention the insane amount of resources wasted lobbying to complicate the tax code so every company and sector gets their loophole. This doesn’t just have the same human capital cost but it also gnaws at the trust people have in the democratic system. It’s a lot harder for Bezos or Cook to lobby for an individual tax cut than it is for Amazon and Apple.
  • TAForObvReasons 7y ago
    If you really want to start from first principles, corporations may seem to be financial pass-through entities but serve as legal shields. Shareholders are not personally liable for externalities like environmental catastrophes or labor law violations. Elon Musk isn't subject to incarceration when someone is killed in an autopilot failure. If you believe that corporations should also pass through legal liabilities, then sure it makes no sense to pay corporate taxes. But that's not the world we live in.
    • woah 7y ago
      LLCs are pass through entities but are limited liability
• anonymous5133 7y ago
  Yup. Corporate/business taxes to begin with are not so smart because because businesses can basically incorporate in any jurisdiction for reduced or 0% tax rates. Many countries have "free trade zones" with 0% business taxes. Those countries still benefit though because their citizens get jobs they might not otherwise have access to. With free trade agreements, it is easier than ever to have your headquarters in a tax haven and then manufacture and sell your products worldwide.
• jankotek 7y ago
  Taxing people has the same problem; trust founds, tax heavens... Sales / VAT tax is not progressive and is unfair to poor people.
  • sneak 7y ago
    True, however inflation works the same way, and is a much bigger and persistent threat to the poor than sales tax or VAT; inflation compounds over time whereas sales taxes do not. Inflation is basically an unvoted regressive tax on the poor that increases every year.
    • Nursie 7y ago
      Inflation is no threat to the poor at all. The poor have zero or worse net worth. Inflation benefits them by reducing the impact of their debts over time. When all your money (and more) goes on just living, inflation is a complete irrelevance (so long as your wages keep up, of course).
      • lotsofpulp 7y ago
        Recent decades of history show your last condition is not true, wages do not keep up.
        • isostatic 7y ago
          That looks true when inflation goes above about 6% https://www.stlouisfed.org/~/media/blog/2015/november/graph_blog_wage_growth-finalv2.jpg?la=en https://www.stlouisfed.org/~/media/blog/2015/november/graph_...
        • zaroth 7y ago
          Wages are not set by inflation, they are set by supply/demand for labor. In the face of lower historical inflation, wages would just be lower today as a result.
      • agent008t 7y ago
• tjbiddle 7y ago
  Taxes aren't just a means of revenue for the government, they're a means of incentivizing for various goals. - Want a higher population? Give a deduction for children. - Want citizens to switch to alternative energies? Give a deduction for solar panel roofs and electric cars. - Want to reduce dependency on foreign oil? Give a deduction for new drilling operations. - Want to create more jobs? Give a deduction for each employee. - Want to create more housing? Give a deduction for real estate depreciation. - Want to encourage new technologies? Give a deduction for R&D expenses.
  • conanbatt 7y ago
    You are making an excellent case for a revolt.
    • ionised 7y ago
      You want to revolt against how society has worked pretty much since the dawn of civilisation?
      • conanbatt 7y ago
        There's been plenty of revolutions since the dawn of civilization. But also taxing as a way to ('subtly') modify behavior is a very new concept, it didn't exist centuries ago.
  • kalleboo 7y ago
    You could just hand out money instead of deducting it from taxes. E.g. it's common in many countries to get a child raising stipend which is basically cash in hand (well, in bank account)
    • jsnider3 7y ago
      Financially, these are the same, but politically they're not.
  • pnongrata 7y ago
• slg 7y ago
  You are ignoring a secondary reasons for taxes. The primary reason is obviously to raise funds for public use. The secondary reason is to give the government more control over the economy. You are right, there are ways to drastically simplify tax law if we wanted to tax ever dollar at the exact same rate or had very clear marginal tax rate buckets. We don't do that because we want to incentivize certain actions. On a personal level, you get a tax break if you pay for your education, you get a tax break if you invest in your career, you get a tax break if you have children, you get a tax break if you earn your money through investments rather than through employment, etc. We don't necessarily do those things to be nice. We do those things because we believe they are good for the overall economy and it is beneficial for them to be incentivized.
  • hartator 7y ago
    You can still do all of that with no corporate taxes. As every incentives you cited are on the individual taxes.
    • slg 7y ago
      Sorry, I thought it would be clear that I wasn't trying to cite a complete list. There are also countless corporate tax incentives too. Clean energy is one example. How do you incentivize companies to use clean energy by taxing individuals?
• skookumchuck 7y ago
  Ideally, taxes should be used to discourage undesirable things, like emitting pollution. Taxes should not be used to discourage productive activity. We should be taxing pollution, consumption of raw materials, plastics, use of undeveloped land, etc.
  • sokoloff 7y ago
    > Taxes should not be used to discourage productive activity. We should be taxing...use of undeveloped land. Aren't many (most?) uses of undeveloped land productive? About 100 years ago, someone built the house I'm sitting in. That was a productive activity to transform the use of that land for housing, IMO.
    • skookumchuck 7y ago
      If it's productive enough, it's worthwhile paying the tax. There's only so much undeveloped land, developing it all means destroying our environment.
• Nursie 7y ago
  But the money doesn't always go to people. In the UK at least, Corporation tax is specifically calculated on what's left after you've paid the people, and after you've taken into account reinvestment. I agree that the baroque structures, and the crazy accountancy games companies play, need to be addressed somehow.
• cameldrv 7y ago
  Wait, I thought corporations were people. When people earn money, they owe income tax on it.
  • moogly 7y ago
    All of the rights of people, but none of the obligations.
• pjc50 7y ago
  > All the money goes to actual people which are a lot easier to tax than a corporation. Are you sure about that? Businesses are highly visible, tracked entities that have to file accounts. It's also not unusual for the very rich to route all their activities through a business, especially political donations.
  • sokoloff 7y ago
    It's much more difficult for a person to shard their lives such that they live over here for this purpose but over there for that purpose, whereas for a company of any significant size, that's fairly easy.
    • pjc50 7y ago
      It requires more wealth, and it's a lot harder to do if you're a US national with their unique global income tax rule, but people absolutely do split their lives for tax purposes. It usually requires dividing your time among at least three different countries, but one of them is usually a nice warm island. e.g. http://expatandoffshore.com/blog/top-ten-tax-exiles http://expatandoffshore.com/blog/top-ten-tax-exiles > In a highly interesting manoeuvre, Sir Philip [Green] manages his various businesses through a holding company - Taveta Investments. This is registered in the name of his wife Christina, a South African who resides in Monaco. The family and company thus manage to avoid tens of millions in tax.
• BlackFly 7y ago
  "Corporations are people, my friend!" Corporations are certainly not pass through entities. They own assets, they exert influence on society. They benefit from government institutions. They amass wealth so that they can spend it to their benefit. Maybe, like people, it makes more sense to tax them on revenue then on profit so they cannot invert to a cheaper jurisdiction? Or am I a pass through entity? Arguably, most actual people are more pass through entities with respect to money then corporations. Corporations are far more likely than most individuals to amass wealth.
  • TomMarius 7y ago
    VAT solves that
    • rwmj 7y ago
      At the cost of complexity and acting as a honey pot for criminals. I have to deal with VAT for a business I help to run and it's very complex. The bigger problem in the EU are the large amounts of carousel/VAT fraud.
      • ed_balls 7y ago
        > I help to run and it's very complex. Most of the complexity comes from a backward compatibility and the fact that politicians creates exceptions for certain products to gain votes. If the tax was the same for everything it would be much simpler. Fraud is a solved problem, especially if you can start from a blank slate like in US. Governments are trying to reduce the fraud, but they are super slow. https://en.wikipedia.org/wiki/SAF-T https://en.wikipedia.org/wiki/SAF-T
  • Xylakant 7y ago
    > Maybe, like people, it makes more sense to tax them on revenue then on profit so they cannot invert to a cheaper jurisdiction? Taxing on revenue as opposed to profits harms corporations that have a low margin, high turnover business (for example retailers)
• zzzzzzzza 7y ago
  Maybe I am ignorant about tax law but people seem a lot harder to “invert” to cheaper tax jurisdictions no matter how rich they are. this is only because we allow corporations deductions for intellectual property, remove ip deductions and remaining corp income deductions will revolve around paying wages and investing capital (e.g. building a factory), things that cannot be "inverted" or made to pass through ireland. the corp income tax is actually less harmful than personal income or sales taxes precisely because it only falls on corp profits and the aforementioned deductions (with exception of ip) are good ones - you want companies doing those things. arguably double taxation on dividends is a somewhat questionable feature of the corp income tax though (and if anything the last type of company you would want to exempt from this double taxation is REIT like ones)
• sitharus 7y ago
  I sort of agree, but in jurisdictions with low corporate taxes and high personal ones you’ll find a lot of small contracting companies that hold a lot of personal assets.
  • coredog64 7y ago
    The IRS already takes a dim view of this in the US.
• StreamBright 7y ago
  Why would it be the case? Not all the money ends up with humans. Google and Apple has the largest cash stock in recorded human history.
• danieltillett 7y ago
  Well your friends from downunder figured out how to solve this long ago. You allow the company to pass through a tax credit (franking) to the shareholders on any dividends paid. It is amazing how keen companies are to pay tax when this is in place.
• JauntTrooper 7y ago
  There are problems with every type of tax. Property taxes are tough because many assets are hard to value/assess and often don’t pay enough cash flow to cover their taxes, which could lead to forcing a sale (at fire sale prices for illiquid assets). Sales taxes tend to hit lower income people the hardest since they’re spending most of their income while the wealthy are not. You could adjust for this, but then it becomes complicated and administratively burdensome. Tariffs distort trade and slow economic growth (though there are many people that find that trade-off worth it for other reasons). I think a lot our system in the US is designed for ease for collection, rather than what is most efficient. The good thing about corporate taxes is that corporations tend to be more meticulous about tracking their income and expenses, and probably also about paying their legal taxes on time than individuals. Tax revenue collected would probably plummet if we did away with the W-4 withholding system on individual income taxes and people had to file them once a quarter/year like corporations do.
  • humanrebar 7y ago
    > You could adjust for this, but then it becomes complicated and administratively burdensome. Minimum income is fairly simple. As are earned income tax credits. It's no more complicated than free need-based bus passes to offset flat bus fares.
  • analog31 7y ago
    Indeed, if we eliminated withholding, a large swath of people would simply have no money to pay their taxes.
  • leetcrew 7y ago
    maybe this is overly cynical, but I suspect it goes further than "ease of collection". the average person is unlikely to strongly oppose corporate income taxes because they believe it doesn't take any money out of their pocket. if they understood tax incidence, and how little consensus there is among economists regarding corporate tax incidence, they might feel differently. the US tax system seems to be designed more towards political expedience than any other goal. sales tax, which voters feel every day, is relatively low compared to VAT implementations in Europe. the income tax hits high earners pretty hard, but there are innumerable loopholes and exceptions for very wealthy holders of capital to avoid paying significant capital gains. it seems like the whole system is setup to look like it's fleecing rich people while it subtly sabotages itself in thousands of pages of tax law. edit: also you are probably right that we would have trouble collecting tax if we eliminated withholding, but what does that have to do with corporate income tax?
• ThrustVectoring 7y ago
  The problem is that the money only goes to actual people eventually, not when it is earned. A beneficial owner can simply sit on their share of the company as it earns profits and becomes more valuable, and incur capital gains taxes if and when they sell. They can defer these taxes indefinitely - if they need cash, they can simply use the stock as collateral for a loan in lieu of realizing capital gains taxes. And when they die, the cost basis gets reset, wiping out whatever taxes have been deferred (and replacing them with estate taxes, if those haven't also been optimized away).
  • mbrumlow 7y ago
    But the gains made by the lender are taxed, so in a way even taking a lone out you are still being taxed. Loans are not free.
    • ThrustVectoring 7y ago
      If you itemize your taxes, investment interest expenses (such as margin loans) are deductible against your net taxable investment income, with carry forward of unused amounts. So it nets out to zero.
      • mbrumlow 7y ago
        Margin loans don't give you cash to go buy a car or house, or pay for a fancy vacation. If somebody figured out how to do this they probably are breaking the law. There are also a lot of limitations to how much can be detected in this manner. So back to the point, at some point, you are going to want to convert your wealth into actual cash to spend. When this happens taxes are levied. Yes at different rates. Loans backed by your assets do come at lower interest rates, because of less risk, but the interest as profit on the bank is taxed as income -- for the bank. Also, on the title "U.S. businesses contribute the smallest share of federal taxes" while may fair, looks interesting next to "U.S. businesses pay us nearly all of their paycheck". I think it would be more simple of businesses had 100% the tax burden, but I don't think it would translate into any of us taking home more cash. All that would happen is wages would lower and businesses would pay the tax.
• cptskippy 7y ago
  The problem is that corporations have value, assets, and money. And more importantly they can leverage it. If we moved to a 0% Corporate tax and relied entirely on income tax then we'd start to see all manner of schemes for Executives to avoid taxes. They'd do things like taking little salary but instead being issued Corporate spending accounts with limits comparable to what they'd otherwise earn in salary.
• Kurtz79 7y ago
  While I agree in principle, in practice you would have no guarantee that the money companies would save on taxes would directly go to increasing employees' wages, which would have to balance the increased individual taxes that you mention. Market forces would compensate to an extent, but not for jobs with a low demand/supply ratio, I think.