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Well for one thing, they aren't the primary source. For another, reinvesting into the business lowers your tax burden.
by s2g 8y ago
Well for one thing, they aren't the primary source.
For another, reinvesting into the business lowers your tax burden.
- chrischen 8y agoYes I agree the tax has a positive benefit of incentivizing re-investment (payroll, or other spending) to avoid paying taxes, BUT it seems like this has a high risk of causing companies to focus on short term re-investments. Famously, companies with thin profit margins from constant reinvestment become less resilient to economic downturns and shifting industry trends, like defunct retailers like Circuit City. Having no saved up capital means companies like that are completely unable to properly reinvent themselves if market shifts happen relatively fast and they have no reserve capital.