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I don't know the US tax system, but I assume you have both VAT and income tax. With that assumption, why should a company pay tax of their profit? As soon as th

I don't know the US tax system, but I assume you have both VAT and income tax. With that assumption, why should a company pay tax of their profit? As soon as they spend some of that profit some of it is taxed in the form of VAT and income tax. When you have a system where profit is taxed, you get companies investing the money in the most risk free thing they can, to avoid the profit tax. If profit tax is 0% it's far simpler to keep the money home, and to use it when they want to.

hollerith 11y ago
The US does not have VAT.
fivre 11y ago
We don't have VAT. We have sales tax, and it varies per state and locality, and rarely makes any sense.
- hvidgaard 11y ago
  With sales taxes, the point still stands though.
  - tstrimple 11y ago
    There is no national sales tax.
dingaling 11y ago
> As soon as they spend some of that profit some of it is taxed in the form of VAT and income tax. VAT-rated companies claim-back VAT again VAT-rated sales. In fact, a VAT-rated company can earn more in VAT rebates than it collects in sales. The traditional moral reason for taxing profit is that it's excess money for which the company couldn't find a use; they've already paid the staff, invested in R&D and maintained the corporate jet fleet and they still have money left over. The Government can quite easily find a use for that excess cash in providing infrastructure which the company needs in order to operate.
- hvidgaard 11y ago
  If a company keeps getting more in VAT rebate, it will at some point be denied to get the rebate. At least in Denmark. In any case, I just cannot wrap my head around that way of thinking "you cannot find a use for it, therefore you must give it to me". The company already generated taxes and probably jobs. It just seems greedy.
  - newjersey 11y ago
    I mostly agree with you. We could and probably should eliminate corporate income tax. However, this repeal should only come after many years (I'd say decades) of stable growth in personal income tax rates (going as high as 90% of income above a certain threshold -- I recommend the threshold be at 100x the natuonal minimum wage times two thousand or about $3M annually) and criminal penalties for failure to report income that pushes people above that threshold (I'd recommend a minimum sentencing guideline of 10 years in prison). Here income will include any expenses the "employer" corporation makes for the employee. The idea is to not affect police officers who make $60k a year and get free lunches worth $2k a year but to affect executives who make $2M and live in a corporate owned home, drive a corporate owned car, take corporate jets and so on. Sure, the corporation can stash unlimited wealth but you can't spend any for personal reasons without paying your fair share in taxes. Thoughts?
- fulldecent 11y ago
  Right, and ignoring Bush-era tax cuts, that money will be taxed well when it is payed out to investors.
- whatok 11y ago
  > The traditional moral reason for taxing profit is that it's excess money for which the company couldn't find a use; they've already paid the staff, invested in R&D and maintained the corporate jet fleet and they still have money left over. The Government can quite easily find a use for that excess cash in providing infrastructure which the company needs in order to operate. This is complete absurdity. There should be no "moral" reason behind taxes; only logical. Taxes on profit are punitive against small businesses and encourage tax optimization strategies that are not remotely related to any sort of sound business. Assuming any government is going to better spend money than private enterprise is one of the funniest things I've read today.
biehl 11y ago
One good reason to tax corporate profit is that (large) corporate profit is a market failure (lack of competition) - and a profit tax can help lessen that failure.
- whatok 11y ago
  Or, just maybe, you could eliminate or lessen whatever regulation exists that enables that lack of competition.
  - biehl 11y ago
    Possibly. For Pfizer that would surely mean eliminating patents on medicine. Apple for example, that would mean eliminating patents on software and hardware, copyright on software, design-patents etc.
adaml_623 11y ago
Personally I believe that tax both personal and corporate is justified by the fact that companies and people use the infrastructure of the country they are operating or living in. That includes currency, legal system, implicit and explicit use of the education system, physical security and of course physical infrastructure. VAT as a tax only taxes their use of the locally available marketplace of goods and services.
- hvidgaard 11y ago
  That some of that should be taxed by taxing things like fuel, water and electricity.

hollerith 11y ago

The US does not have VAT.

fivre 11y ago

We don't have VAT. We have sales tax, and it varies per state and locality, and rarely makes any sense.

hvidgaard 11y ago
With sales taxes, the point still stands though.
- tstrimple 11y ago
  There is no national sales tax.

dingaling 11y ago

> As soon as they spend some of that profit some of it is taxed in the form of VAT and income tax. VAT-rated companies claim-back VAT again VAT-rated sales. In fact, a VAT-rated company can earn more in VAT rebates than it collects in sales. The traditional moral reason for taxing profit is that it's excess money for which the company couldn't find a use; they've already paid the staff, invested in R&D and maintained the corporate jet fleet and they still have money left over. The Government can quite easily find a use for that excess cash in providing infrastructure which the company needs in order to operate.

hvidgaard 11y ago
If a company keeps getting more in VAT rebate, it will at some point be denied to get the rebate. At least in Denmark. In any case, I just cannot wrap my head around that way of thinking "you cannot find a use for it, therefore you must give it to me". The company already generated taxes and probably jobs. It just seems greedy.
- newjersey 11y ago
  I mostly agree with you. We could and probably should eliminate corporate income tax. However, this repeal should only come after many years (I'd say decades) of stable growth in personal income tax rates (going as high as 90% of income above a certain threshold -- I recommend the threshold be at 100x the natuonal minimum wage times two thousand or about $3M annually) and criminal penalties for failure to report income that pushes people above that threshold (I'd recommend a minimum sentencing guideline of 10 years in prison). Here income will include any expenses the "employer" corporation makes for the employee. The idea is to not affect police officers who make $60k a year and get free lunches worth $2k a year but to affect executives who make $2M and live in a corporate owned home, drive a corporate owned car, take corporate jets and so on. Sure, the corporation can stash unlimited wealth but you can't spend any for personal reasons without paying your fair share in taxes. Thoughts?
fulldecent 11y ago
Right, and ignoring Bush-era tax cuts, that money will be taxed well when it is payed out to investors.
whatok 11y ago
> The traditional moral reason for taxing profit is that it's excess money for which the company couldn't find a use; they've already paid the staff, invested in R&D and maintained the corporate jet fleet and they still have money left over. The Government can quite easily find a use for that excess cash in providing infrastructure which the company needs in order to operate. This is complete absurdity. There should be no "moral" reason behind taxes; only logical. Taxes on profit are punitive against small businesses and encourage tax optimization strategies that are not remotely related to any sort of sound business. Assuming any government is going to better spend money than private enterprise is one of the funniest things I've read today.

biehl 11y ago

One good reason to tax corporate profit is that (large) corporate profit is a market failure (lack of competition) - and a profit tax can help lessen that failure.

whatok 11y ago
Or, just maybe, you could eliminate or lessen whatever regulation exists that enables that lack of competition.
- biehl 11y ago
  Possibly. For Pfizer that would surely mean eliminating patents on medicine. Apple for example, that would mean eliminating patents on software and hardware, copyright on software, design-patents etc.

adaml_623 11y ago

Personally I believe that tax both personal and corporate is justified by the fact that companies and people use the infrastructure of the country they are operating or living in. That includes currency, legal system, implicit and explicit use of the education system, physical security and of course physical infrastructure. VAT as a tax only taxes their use of the locally available marketplace of goods and services.

hvidgaard 11y ago
That some of that should be taxed by taxing things like fuel, water and electricity.