6 ms·

Corporate income taxes should be eliminated. Instead of focusing on building a company and good products, companies have to dedicate resources to figure out how

Corporate income taxes should be eliminated. Instead of focusing on building a company and good products, companies have to dedicate resources to figure out how to escape the taxation. Taxation should be done when profit is distributed to shareholders (similar to Estonia). There is also unfair double taxation - paying taxes after company pays them.

spyspy 10y ago
Then we'd have companies like Amazon that refuse to pay a dividend indefinitely.
- thinkdevcode 10y ago
  You don't have to invest in Amazon if it doesn't meet your expectations.
  - jonas21 10y ago
    Taxes on profits would be deferred indefinitely. This increases everyone else's share of the tax burden regardless of whether they've invested in the company.
    - mnx 10y ago
      If they make no profit, aren't they essentially running a charity for the efficient delivery of paper towels and power adapters?
- Pxtl 10y ago
  Tax capital gains as income.
  - Frondo 10y ago
    Or tax wealth.
  - spyspy 10y ago
    And watch participation in the stock market fall off a cliff.
    - jsmith0295 10y ago
      Probably not. Assuming your goal was to leave the tax level about the same, you'd just have it all coming out as income tax on an individual rather than taxing it twice.
  - JoshTriplett 10y ago
    Millions of retirees have carefully worked out the point at which they can retire based on capital gains, and increasing taxes on it would break that. Perhaps tax income like capital gains, if you want them to match.
    - koralatov 10y ago
      It would definitely need a lot of careful though to get the balance right. As it stands, the UK's maximum capital gains tax rate is 28% vs. 45% for the top rate of income tax. This leads to the situation, not at all uncommon or illegal, where a lot of highly paid professionals are the directors of their own limited companies, take no salary, and get all of their remuneration in the form of dividends taxed a maximum rate of 28%. For reference, anything over £31,786 per year is taxed at 40% -- before that it's 20% (national insurance is extra). It's usually the case that freelancers or contractors are able to invoice via their own limited companies, whereas employees are not normally able to do it this way and have to go the income tax route. Doing this is entirely legal, and many people argue that it's perfectly 'fair', but it definitely doesn't look fair to those unable to take advantage of that setup who earn, say, £60,000. Some figures, very rough and rounded to whole pounds: Earning £60,000 and paying income tax: --------------------------- £10,800 - 0% = £10,800 Tax free allowance £31,700 - 20% = £25,360 'Basic Rate' tax £17,500 - 40% = £10,500 'Higher Rate' tax =========================== £60,000 gross = £37,210 net (before national insurance contributions are taken) Earning £60,000 and paying capital gains tax: --------------------------- £11,000 - 0% = £11,000 Tax free allowance £49,000 - 28% = £35,280 Highest CGT rate =========================== £60,000 gross = £46,280 net (before national insurance contributions are taken) So under that setup, someone who can't use the limited company method is nearly £10,000 a year worse off before national insurance contributions are taken into account. Even assuming some costs for accounting, that still leaves the second person significantly better off. (Edited to remove duplicated calculations at top of comment.)
      - JoshTriplett 10y ago
        I was specifically thinking of the US capital gains structure (see https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_Unite... ); this varies wildly by country. US capital gains taxes are always lower than the corresponding income tax bracket, hence my comment; it looks like UK capital gains are potentially higher than the corresponding income tax bracket for the same amount.
- jsmith0295 10y ago
  Even if that were the case you could tax gains from selling their stock as income. If they were hoarding cash the value of that cash would increase their stock price.
throwaway729 10y ago
Wow. I mean, if you're going to argue that corporate tax rates should be lower, just make that argument. But the argument that corporations should be able to pay fewer taxes because they (and/or other corporations) lobbied to create a byzantine tax law that they then exploited is... a special kind of argument.
- refurb 10y ago
  Is your argument that tax law is only complex because of lobbying. That seems like a ridiculous statement. The gov't is more than capable of coming up with complex regulations.
- bluecalm 10y ago
  The argument is that income tax for companies is a terrible idea and it's better to move taxation to different places. Places where you can be both more efficient and more fair at collecting. It's impossible to make income tax fair. The simplest example is selling rights to trademark or some licensing to friendly company located in tax heaven. You will never be able to assess fair value of a trademark and you will always be left with litigation hell. It's just the worst possible tax.
  - koralatov 10y ago
    Out of curiosity, what's a better idea than income tax for corporations? Assuming we do away with it, what's the more efficient and fairer way you'd propose?
    - sib 10y ago
      Taxing the owners (as in a subchapter S corporation in the US). It's a pass-through. Then you don't have the incentive to do things like the double-Irish or similar unnatural acts.
      - koralatov 10y ago
        That's one way of doing it, but means that if the majority of your stock is held by foreign nationals residing abroad, the U.S. gets much less income, even though the majority of the value is being generated in the U.S. using U.S. infrastructure and services.
karma_vaccum123 10y ago
Then most of the upper and middle class would incorporate, leaving the poor to pay income tax.
- jsmith0295 10y ago
  Even if you did this you would still need to pay yourself a salary or dividends, either of which would then be taxed as income. So there's some wiggle room to avoid paying tax on business expenses, and I'm sure that would be abused to an extent, but given that the tax system would likely still be progressive there's on reason the poor would be paying a larger share of the tax.
  - maxerickson 10y ago
    Under current law, if you live rent free in a house provided by a corporation that you owned, you anyway have to recognize an appropriate amount of personal income for that. Same with the use of a vehicle. Compliance in such situations would probably be lower with no corporate tax, by incorporating isn't some magic process that makes income disappear.
unabst 10y ago
Actually this is not as bad as most people assume. Companies should mostly re-invest, so should have no income. They should only have growth. Taxing profit is taxing the reward (a delusion of money produced after all operations), which is what's suppose to justify it. But taxing growth is taxing the company itself (taxing the operations). Taxing shares or dividends would be taxing rewards. Apple has generated a boatload of income tax and sales tax and capital gains tax, and these numbers are usually left out of corporate tax news pieces. That said, Amazon being able to escape sales tax early was bad. Also individuals avoiding income tax through shell companies in tax havens is also bad. At least worse than global corporations escaping the US corporate tax...
- JoshTriplett 10y ago
  > Amazon being able to escape sales tax early was bad. They didn't "escape" it; states attempted to charge it for inter-state transactions, which they can't legally do in the absence of federal law allowing that. Amazon only became obligated to pay it when they started conducting intra-state commerce, which states are allowed to regulate and tax.
- sib 10y ago
  "Amazon being able to escape sales tax early was bad" - they didn't escape it. In fact, they were following the law and acting exactly as traditional catalog retailers did; they charged sales tax to customers located in states in which Amazon has a physical presence. It only became a real political hot button issue when they started getting so big that they became a target.
  - unabst 10y ago
    Following the law doesn't make it not bad. Tax havens are legal and so are corporate tax loopholes. That's why they're holes, not crimes. It was bad because 1) it was bad for small businesses that had to collect and had a hard time competing on price alone to begin with -- making it impossible to compete. And 2) because sales tax is a huge tax contribution which otherwise the government would have counted on. And regarding escaping, it was an integral part of their business plan, and they fully intended to fight for it. > the State of California agreed to a delay of one year before requiring online retailers to begin collecting sales tax on sales to California addresses (Read the whole part on California [1]) Worse yet, Amazon wasn't even profiting in the process. Making Jeff either Satan or a genius (you'll find plenty of stories proclaiming both). Amazon created jobs and shareholder value. I'll give them that. ---- [1] https://en.wikipedia.org/wiki/Amazon_tax https://en.wikipedia.org/wiki/Amazon_tax
jsmith0295 10y ago
You'd have to come up with a reasonable way to tax the gains of foreign investors, but otherwise I think it makes sense to just get rid of both capital gains and corporate income taxes and just roll everything into the personal income tax system.

spyspy 10y ago

Then we'd have companies like Amazon that refuse to pay a dividend indefinitely.

thinkdevcode 10y ago
You don't have to invest in Amazon if it doesn't meet your expectations.
- jonas21 10y ago
  Taxes on profits would be deferred indefinitely. This increases everyone else's share of the tax burden regardless of whether they've invested in the company.
  - mnx 10y ago
    If they make no profit, aren't they essentially running a charity for the efficient delivery of paper towels and power adapters?
Pxtl 10y ago
Tax capital gains as income.
- Frondo 10y ago
  Or tax wealth.
- spyspy 10y ago
  And watch participation in the stock market fall off a cliff.
  - jsmith0295 10y ago
    Probably not. Assuming your goal was to leave the tax level about the same, you'd just have it all coming out as income tax on an individual rather than taxing it twice.
- JoshTriplett 10y ago
  Millions of retirees have carefully worked out the point at which they can retire based on capital gains, and increasing taxes on it would break that. Perhaps tax income like capital gains, if you want them to match.
  - koralatov 10y ago
    It would definitely need a lot of careful though to get the balance right. As it stands, the UK's maximum capital gains tax rate is 28% vs. 45% for the top rate of income tax. This leads to the situation, not at all uncommon or illegal, where a lot of highly paid professionals are the directors of their own limited companies, take no salary, and get all of their remuneration in the form of dividends taxed a maximum rate of 28%. For reference, anything over £31,786 per year is taxed at 40% -- before that it's 20% (national insurance is extra). It's usually the case that freelancers or contractors are able to invoice via their own limited companies, whereas employees are not normally able to do it this way and have to go the income tax route. Doing this is entirely legal, and many people argue that it's perfectly 'fair', but it definitely doesn't look fair to those unable to take advantage of that setup who earn, say, £60,000. Some figures, very rough and rounded to whole pounds: Earning £60,000 and paying income tax: --------------------------- £10,800 - 0% = £10,800 Tax free allowance £31,700 - 20% = £25,360 'Basic Rate' tax £17,500 - 40% = £10,500 'Higher Rate' tax =========================== £60,000 gross = £37,210 net (before national insurance contributions are taken) Earning £60,000 and paying capital gains tax: --------------------------- £11,000 - 0% = £11,000 Tax free allowance £49,000 - 28% = £35,280 Highest CGT rate =========================== £60,000 gross = £46,280 net (before national insurance contributions are taken) So under that setup, someone who can't use the limited company method is nearly £10,000 a year worse off before national insurance contributions are taken into account. Even assuming some costs for accounting, that still leaves the second person significantly better off. (Edited to remove duplicated calculations at top of comment.)
    - JoshTriplett 10y ago
      I was specifically thinking of the US capital gains structure (see https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_Unite... ); this varies wildly by country. US capital gains taxes are always lower than the corresponding income tax bracket, hence my comment; it looks like UK capital gains are potentially higher than the corresponding income tax bracket for the same amount.
jsmith0295 10y ago
Even if that were the case you could tax gains from selling their stock as income. If they were hoarding cash the value of that cash would increase their stock price.

throwaway729 10y ago

Wow. I mean, if you're going to argue that corporate tax rates should be lower, just make that argument. But the argument that corporations should be able to pay fewer taxes because they (and/or other corporations) lobbied to create a byzantine tax law that they then exploited is... a special kind of argument.

refurb 10y ago
Is your argument that tax law is only complex because of lobbying. That seems like a ridiculous statement. The gov't is more than capable of coming up with complex regulations.
bluecalm 10y ago
The argument is that income tax for companies is a terrible idea and it's better to move taxation to different places. Places where you can be both more efficient and more fair at collecting. It's impossible to make income tax fair. The simplest example is selling rights to trademark or some licensing to friendly company located in tax heaven. You will never be able to assess fair value of a trademark and you will always be left with litigation hell. It's just the worst possible tax.
- koralatov 10y ago
  Out of curiosity, what's a better idea than income tax for corporations? Assuming we do away with it, what's the more efficient and fairer way you'd propose?
  - sib 10y ago
    Taxing the owners (as in a subchapter S corporation in the US). It's a pass-through. Then you don't have the incentive to do things like the double-Irish or similar unnatural acts.
    - koralatov 10y ago
      That's one way of doing it, but means that if the majority of your stock is held by foreign nationals residing abroad, the U.S. gets much less income, even though the majority of the value is being generated in the U.S. using U.S. infrastructure and services.

karma_vaccum123 10y ago

Then most of the upper and middle class would incorporate, leaving the poor to pay income tax.

jsmith0295 10y ago
Even if you did this you would still need to pay yourself a salary or dividends, either of which would then be taxed as income. So there's some wiggle room to avoid paying tax on business expenses, and I'm sure that would be abused to an extent, but given that the tax system would likely still be progressive there's on reason the poor would be paying a larger share of the tax.
- maxerickson 10y ago
  Under current law, if you live rent free in a house provided by a corporation that you owned, you anyway have to recognize an appropriate amount of personal income for that. Same with the use of a vehicle. Compliance in such situations would probably be lower with no corporate tax, by incorporating isn't some magic process that makes income disappear.

unabst 10y ago

Actually this is not as bad as most people assume. Companies should mostly re-invest, so should have no income. They should only have growth. Taxing profit is taxing the reward (a delusion of money produced after all operations), which is what's suppose to justify it. But taxing growth is taxing the company itself (taxing the operations). Taxing shares or dividends would be taxing rewards. Apple has generated a boatload of income tax and sales tax and capital gains tax, and these numbers are usually left out of corporate tax news pieces. That said, Amazon being able to escape sales tax early was bad. Also individuals avoiding income tax through shell companies in tax havens is also bad. At least worse than global corporations escaping the US corporate tax...

JoshTriplett 10y ago
> Amazon being able to escape sales tax early was bad. They didn't "escape" it; states attempted to charge it for inter-state transactions, which they can't legally do in the absence of federal law allowing that. Amazon only became obligated to pay it when they started conducting intra-state commerce, which states are allowed to regulate and tax.
sib 10y ago
"Amazon being able to escape sales tax early was bad" - they didn't escape it. In fact, they were following the law and acting exactly as traditional catalog retailers did; they charged sales tax to customers located in states in which Amazon has a physical presence. It only became a real political hot button issue when they started getting so big that they became a target.
- unabst 10y ago
  Following the law doesn't make it not bad. Tax havens are legal and so are corporate tax loopholes. That's why they're holes, not crimes. It was bad because 1) it was bad for small businesses that had to collect and had a hard time competing on price alone to begin with -- making it impossible to compete. And 2) because sales tax is a huge tax contribution which otherwise the government would have counted on. And regarding escaping, it was an integral part of their business plan, and they fully intended to fight for it. > the State of California agreed to a delay of one year before requiring online retailers to begin collecting sales tax on sales to California addresses (Read the whole part on California [1]) Worse yet, Amazon wasn't even profiting in the process. Making Jeff either Satan or a genius (you'll find plenty of stories proclaiming both). Amazon created jobs and shareholder value. I'll give them that. ---- [1] https://en.wikipedia.org/wiki/Amazon_tax https://en.wikipedia.org/wiki/Amazon_tax

jsmith0295 10y ago

You'd have to come up with a reasonable way to tax the gains of foreign investors, but otherwise I think it makes sense to just get rid of both capital gains and corporate income taxes and just roll everything into the personal income tax system.