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But you can't do anything with that money (left in the corporation) - it eventually winds up buying things for people, or being transferred to someone's bank ac
by ves 11y ago
But you can't do anything with that money (left in the corporation) - it eventually winds up buying things for people, or being transferred to someone's bank account, at which point it will be taxed.
You could leave it on the company's balance sheets forever, but that's pretty stupid, especially if you're trying to avoid taxes, as then you just get none of the money instead of most of it.
Why not just tax the people that make up the corporations? They have to spend 51% of their time somewhere, and all taxable stuff winds up in their hands (don't tax reinvestments), so figuring out their tax obligations is simple, relatively.
- tim333 11y agoYeah but say you own a house and write some hit software that brings in $1m a year. At the moment either you or your company pay income tax on the $1m. With zero corp tax you leave all the money in the company, the company buys a corporate yacht and jet, for spending money you pay yourself minimum wage and borrow a bit against the house. Result millionaire lifestyle, zero tax. I see your point in principle but in practice it makes the above kind of avoidance too easy. Unless you are some place that doesn't need to raise income tax because it has another source of money eg, Dubai with oil or Monaco with real estate.
- yummyfajitas 11y agoYou can (in principle) do this anyway - the jet and the yacht are expenses, and you only pay corporate income tax on the profit ($1M - cost of yacht - cost of house ~= $0). In practice the IRS will treat use of the yacht as taxable income paid to the user.
- tim333 11y agoMaybe but I'd bet if you surveyed all the corporate jets out there and found what percentage were being treated as personal taxable income you'd find it pretty low.
- digbyloftus 11y agoIt would seem like fixing that problem directly rather than using a roundabout system of taxing corporations, which comes with its own set of problems, would be the better way to go about things.
- yummyfajitas 11y agoPerhaps, but its moot. Taxing corporations does not fix this problem (since money spent on yachts is treated as expenses and not taxed as income) and eliminating corporate income tax would not change this. In fact, eliminating corporate income tax would discourage this, since it makes alternatives (namely taking a profit and reinvesting in the business) cheaper.