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Not an economist so I don't know the official reason. But a corporation can theoretically accumulate profits indefinitely without making a payout, while governm
by ip26 8y ago
Not an economist so I don't know the official reason. But a corporation can theoretically accumulate profits indefinitely without making a payout, while governments need stable yearly revenue.
Maybe more material from a public policy point of view is that we like to tax different things at different rates, to favor or disfavor spending on various things. Hard to tax a salary based on what the employer spent their money on.
- tonyedgecombe 8y agoA corporation could accumulate although I expect shareholders would stop that fairly quickly. You could still implement Pigovian taxes such as fuel or alcohol duties.
- petronio 8y agoThere's many valid reasons for accumulating profits, such as planning buyouts or expansions. That being said, sometimes it can be done for reasons such as waiting for a preferable tax regime. Due to that, some countries have a separate accumulated earnings tax that is similar to individual wealth taxes to disincentivize accumulating without a business purpose.