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Because they act as a stand alone entity, and they may make and keep profit that doesn’t get dispersed to the employees.

emteycz 6y ago
They don't make use of it in a way a person does. They use it to make more income, not for food, housing, fun, etc.
- TheRealSteel 6y ago
  That sounds like more of a reason to tax them, not less.
  - anonunivgrad 6y ago
    You’re just quibbling about how much the total taxation should be. The point is that it doesn’t matter if you tax the company profits at 20% and capital gains at 20% (assume the normal income tax is 40%) or if you tax the company 0% and tax capital gains at 40%. The government already tries to reduce double taxation. There is not supposed to be a penalty for incorporating vs. doing business as a sole proprietor or general partnership. That’s why the capital gains tax is lower than the income tax. This is all about ease of administration and making creative accounting more difficult or impossible. If you’re looking at it through some moral lens, you don’t get it.
    - PeterisP 6y ago
      It does matter if you tax the company profits at 20% and capital gains at 20% (assume the normal income tax is 40%) or if you tax the company 0% and tax capital gains at 40% - because there's a substantial timing difference. You have to pay the corporate income tax this year; you can generally defer the capital gains tax for arbitrary amount of time with some structuring to avoid any taxable event; there's some overhead involved so it's not for small amounts of capital gain, and you need control over the corporate structure, you can't do it for capital gains on 0.001% or Apple; however, if you'd have 0% tax on company profits and capital gains at 40%, then all the billionaires would be paying essentially zero taxes.
  - deleted 6y ago
    [deleted]
  - emteycz 6y ago
    No, it doesn't. It's a reason to not tax them. We try to tax consumption, not production in the modern world. Plus what the other commenter said.
anonunivgrad 6y ago
A company doesn’t “keep” anything. It eventually uses all of its money to either pay dividends (or stock buybacks, their financial equivalent), salaries, business expenses. We tax corporate profits, not income. That takes out of the dividend stream, so we tax capital gains (the tax the investors pay on dividends/stock appreciation) correspondingly lower. You could in theory get rid of the corporate tax and just tax capital gains at the same rate as income. It would fix a lot of problems. But you would upset a lot of people who don’t understand finance and taxation, like the people seeing red in this thread, who have some moral gripe with these corporations (who are mostly just doing what the law incentivized them to). It would have one small effect though. Since the US taxes the worldwide income of its citizens and permanent residents, it would probably overtax them, making them pay the higher capital gains rate for profits made in countries that do retain the corporate tax. The most obvious ways to fix that would just reintroduce the problem of sorting out where the profit was “made”, which is where we are now. Ideally, you’d get all of the western countries to sign up to end this stupid corporate tax at the same time. That’s difficult because a few important countries have used low corporate tax rates as a way to attract business that would otherwise have no reason to be there.
- PragmaticPulp 6y ago
  > A company doesn’t “keep” anything. It eventually uses all of its money to either pay dividends (or stock buybacks, their financial equivalent), salaries, business expenses. Companies certainly do keep cash balances. That cash balance directly adds to the company’s valuation. They’re not obligated to pay it out or spend it. The owners of the company can sell the company, including cash balance, as an asset. Suggesting that a company’s cash balance somehow doesn’t count because it’s inside a company structure is disingenuous.
  - anonunivgrad 6y ago
    >The owners of the company can sell the company, including cash balance, as an asset. And just what do you think a cash balance does to the sale price of a company? Btw, that sale is a capital gain.
- 6y ago

emteycz 6y ago

They don't make use of it in a way a person does. They use it to make more income, not for food, housing, fun, etc.

TheRealSteel 6y ago
That sounds like more of a reason to tax them, not less.
- anonunivgrad 6y ago
  You’re just quibbling about how much the total taxation should be. The point is that it doesn’t matter if you tax the company profits at 20% and capital gains at 20% (assume the normal income tax is 40%) or if you tax the company 0% and tax capital gains at 40%. The government already tries to reduce double taxation. There is not supposed to be a penalty for incorporating vs. doing business as a sole proprietor or general partnership. That’s why the capital gains tax is lower than the income tax. This is all about ease of administration and making creative accounting more difficult or impossible. If you’re looking at it through some moral lens, you don’t get it.
  - PeterisP 6y ago
    It does matter if you tax the company profits at 20% and capital gains at 20% (assume the normal income tax is 40%) or if you tax the company 0% and tax capital gains at 40% - because there's a substantial timing difference. You have to pay the corporate income tax this year; you can generally defer the capital gains tax for arbitrary amount of time with some structuring to avoid any taxable event; there's some overhead involved so it's not for small amounts of capital gain, and you need control over the corporate structure, you can't do it for capital gains on 0.001% or Apple; however, if you'd have 0% tax on company profits and capital gains at 40%, then all the billionaires would be paying essentially zero taxes.
- deleted 6y ago
  [deleted]
- emteycz 6y ago
  No, it doesn't. It's a reason to not tax them. We try to tax consumption, not production in the modern world. Plus what the other commenter said.

anonunivgrad 6y ago

A company doesn’t “keep” anything. It eventually uses all of its money to either pay dividends (or stock buybacks, their financial equivalent), salaries, business expenses. We tax corporate profits, not income. That takes out of the dividend stream, so we tax capital gains (the tax the investors pay on dividends/stock appreciation) correspondingly lower. You could in theory get rid of the corporate tax and just tax capital gains at the same rate as income. It would fix a lot of problems. But you would upset a lot of people who don’t understand finance and taxation, like the people seeing red in this thread, who have some moral gripe with these corporations (who are mostly just doing what the law incentivized them to). It would have one small effect though. Since the US taxes the worldwide income of its citizens and permanent residents, it would probably overtax them, making them pay the higher capital gains rate for profits made in countries that do retain the corporate tax. The most obvious ways to fix that would just reintroduce the problem of sorting out where the profit was “made”, which is where we are now. Ideally, you’d get all of the western countries to sign up to end this stupid corporate tax at the same time. That’s difficult because a few important countries have used low corporate tax rates as a way to attract business that would otherwise have no reason to be there.

PragmaticPulp 6y ago
> A company doesn’t “keep” anything. It eventually uses all of its money to either pay dividends (or stock buybacks, their financial equivalent), salaries, business expenses. Companies certainly do keep cash balances. That cash balance directly adds to the company’s valuation. They’re not obligated to pay it out or spend it. The owners of the company can sell the company, including cash balance, as an asset. Suggesting that a company’s cash balance somehow doesn’t count because it’s inside a company structure is disingenuous.
- anonunivgrad 6y ago
  >The owners of the company can sell the company, including cash balance, as an asset. And just what do you think a cash balance does to the sale price of a company? Btw, that sale is a capital gain.
6y ago