3 ms·

you could probably stop that by saying small businesses owned by corporations can't claim this deduction. you could say over 3/4 of the corporation must be own

• gojomo 16y ago
  Private tax arbitrageurs are faster than the regulation-writers. It doesn't have to be ownership for the effective benefit to flow to larger, more established organizations. This might encourage lots of outsourcing to 'startups' that qualify for the tax advantage. But since a guaranteed flow of big-company business removes all risk, the big companies will negotiate a lower rate and/or exclusive deal to make the 'startup' a de facto division -- capturing much of the tax benefit for themselves. Then, acquire the 'startup' at year 5 to make a tax-free payment to the 'startup' management. It doesn't even require conscious scheming to achieve this -- the nudge of the tax code will generally push certain kinds of business in these directions, for certain timeframes, regardless of whether that's the wealth-maximizing (or even jobs-maximizing) outcome. One low tax rate for all economic activity lets the essential factors of production -- as changed over time by culture and technology -- influence organization choices, rather than the passing favor/disfavor of legislators. There should be a strict complexity budget applied to the tax code: let's say about 10KB ASCII text. Adding new special treatment would require taking old special treatments out.