6 ms·

But why tax corporations on income at all? All of that money will eventually be income for an actual person (employees, shareholders) who will be taxed on it, m

But why tax corporations on income at all? All of that money will eventually be income for an actual person (employees, shareholders) who will be taxed on it, most likely at a rate above 24%. And don't forget that sales taxes and VATs exist. Corporations don't exist, so they can't "pay" for the tax. With a corporate income tax, the incidence is out of policymakers' control and some percentage will fall on consumers. Just tax who you want to tax.

spiderfarmer 6y ago
Why wait for an “eventual” trickle down effect?
- granzymes 6y ago
  Because you can better control the tax incidence. https://www.milkenreview.org/articles/the-progressive-case-for-abolishing-the-corporate-income-tax-2 https://www.milkenreview.org/articles/the-progressive-case-f... https://www.theatlantic.com/business/archive/2010/10/why-we-should-eliminate-the-corporate-income-tax/65351/ https://www.theatlantic.com/business/archive/2010/10/why-we-...
  - MrPowers 6y ago
    Yes, and the deadweight loss of taxation. Taxing income is economically inefficient (because huge resource investments are needed for compliance). It's more efficient to tax land, gas, and soda. See Pigovian taxation for more details: https://en.wikipedia.org/wiki/Pigovian_tax https://en.wikipedia.org/wiki/Pigovian_tax
    - triceratops 6y ago
      Why not both?
mushufasa 6y ago
Imagine the process of assessing and collecting a tax from a single entity. Now imagine the process of assessing and collecting taxes from 93,000 entities, including enforcing penalties for people who inadequately report or pay.
- granzymes 6y ago
  In this example, the 93,000 entities are people who are already filing tax returns every year.
jgalt212 6y ago
That's a very sound argument if capital gains and wages were taxed at the same rate.
- deleted 6y ago
  [deleted]
dragonwriter 6y ago
> But why tax corporations at all? Because otherwise they make great tax dodges. > All of that money will eventually be income for an actual person (employees, shareholders) who will be taxed on it, most likely at a rate above 24%. No, it doesn't. The stuff that becomes employee income mostly isn't taxed as corporate income (its a deductible business expense). If it is distribute as dividends, its taxable to the recipient, but certainly that doesn't happen with all after tax corporate profits. Its very common for most investor returns to come as capital gains with the money retained/reinvested in the business.
- ChrisLomont 6y ago
  How are they a tax dodge? The owners are taxed whenever they try to get cash from the business. It’s like claiming a house is a tax dodge because the owner isn’t taxed every quarter in the increase in value. In both cases the owner gets taxed when gains are realized. Corporate income is mostly a way to get incremental cash for govt. But the tax comes gets paid by stocks, effectively taxing pensions, 401ks, etc., without people thinking about it. As a way to check it, there’s academic papers demonstrating every dollar held by a company is matched in market cap - company loses X in cash, market cap drops X. So the company isn’t really paying - it’s shareholders that pay. They ultimately lost the value.
  - dannyw 6y ago
    Because the rich don't tend to sell their stock on regular basis for income: to maximise wealth, they re-invest. Corporate taxes ensure this tax is actually realised on a semiregular basis.
    - tootahe45 6y ago
      > to maximise wealth, they re-invest. Creating more jobs, total assholes really.
jkinudsjknds 6y ago
Apple's $200B vault of cash might disagree for conventional assumptions around the word "eventually". A corporate tax rate also encourages investment (use it or lose it), and will trend towards a greater share going to employees than shareholders all things being equal.
talkingtab 6y ago
OMG. Apple as well as other large companies are sitting on billions of dollars. In other words they are not paying reasonable taxes, nor are they spending the money so that it can or would be taxed.
- qgrgergfqgfev 6y ago
  sitting on money for companies of that size is not a bad idea, most would have gone bankrupt during this crisis if they had not done this.
- MrPowers 6y ago
  The US government wrote the Section 482 tax regulations. Corporations followed the regulations the government wrote. The government provided tons of examples on how taxpayers could follow their rules in the tax guidelines. I've spend hundreds of hours of my life reading the section 482 regs. Multinational companies need to comply with these. Never really understood the vilification of companies that are following the rules.
  - notacoward 6y ago
    > Never really understood the vilification of companies that are following the rules. Your statement is based on a false axiom. Much of the ire is at companies not following the rules. It's just really really hard to untangle all of the shells and subsidiaries and internal transfers of a modern medium-or-larger corporation, so even when they do get caught they end up paying pennies on the dollar of what they owe. Or nothing. Did you hear the news this week about a certain Mr. Trump, who paid zero taxes on hundreds of millions of dollars of forgiven loans (i.e. gifts)? But hey, let's pretend for the sake of argument everyone does play by the rules. Does that make everything OK? Of course not. Those rules are a sociopolitical construct, and do you know who has an outsize influence on what those rules are? Why, the very same corporate "persons" they apply to! From lobbying to regulatory capture to the "revolving door" to outright graft, corporations use their assets to secure laws more favorable to them than any of us mere humans could get. And they make a great return on that investment. Several hundred percent minimum IIRC. Most of it's legal (true graft is only a tiny fraction of it) but that doesn't make it OK.
throwaway5752 6y ago
"Corporations don't exist, so they can't "pay" for the tax" I'm sorry, but how do you square that with the legal rights via judicial precedence they have, like those described in https://en.wikipedia.org/wiki/Corporate_personhood https://en.wikipedia.org/wiki/Corporate_personhood ? How do you square it with the plain language of the USC on the matter (https://www.law.cornell.edu/uscode/text/1/1 https://www.law.cornell.edu/uscode/text/1/1) ?
- granzymes 6y ago
  A corporation is a bunch of paper sitting in, most likely, Delaware. Those papers don't have a life of their own; they are owned by a group of people who also own all of the assets. We pretend that the paper is a person in lots of contexts because it's a convenient fiction. But in this example, the paper very clearly isn't paying income tax.
  - notacoward 6y ago
    > Those papers don't have a life of their own Unfortunately, they do as far as the law is concerned. They have a right to own property - in perpetuity, which makes it an even more powerful right than flesh-and-blood humans have. They have a right to bring lawsuits. They have a right to influence our political process, thanks to Citizens United. They serve as an impenetrable shield between those owners and liability, and (thanks to those property rights) to a large extent taxation as well. Very little of this should be the case, but it is, and because corporations have this very substantial separate existence they should also be subject to tax.
    - ChrisLomont 6y ago
      Should? When this wasn’t the case economies sucked. When you can lose all your possessions if an investment you made fails, no one invested money. There’d be no mortgages, no college loans, no car loans, and zero growth. The LLC is credited with allowing modern economies to happen since for the first time people were only liable for the portion invested, not their entire life assets. Those countries slow to take it up demonstrably lagged economically. Go read on the history of the LLC to see how it revolutionized the world.
mbesto 6y ago
Not taxing corporations sounds controversial on the surface but is actually not a terrible idea in practice. Just push the taxes down to the employee and you could theoretically collect more taxes. They're going to dodge it anyway so all you're doing is creating jobs in other jurisdictions by attempting to tax them.

spiderfarmer 6y ago

Why wait for an “eventual” trickle down effect?

granzymes 6y ago
Because you can better control the tax incidence. https://www.milkenreview.org/articles/the-progressive-case-for-abolishing-the-corporate-income-tax-2 https://www.milkenreview.org/articles/the-progressive-case-f... https://www.theatlantic.com/business/archive/2010/10/why-we-should-eliminate-the-corporate-income-tax/65351/ https://www.theatlantic.com/business/archive/2010/10/why-we-...
- MrPowers 6y ago
  Yes, and the deadweight loss of taxation. Taxing income is economically inefficient (because huge resource investments are needed for compliance). It's more efficient to tax land, gas, and soda. See Pigovian taxation for more details: https://en.wikipedia.org/wiki/Pigovian_tax https://en.wikipedia.org/wiki/Pigovian_tax
  - triceratops 6y ago
    Why not both?

mushufasa 6y ago

Imagine the process of assessing and collecting a tax from a single entity. Now imagine the process of assessing and collecting taxes from 93,000 entities, including enforcing penalties for people who inadequately report or pay.

granzymes 6y ago
In this example, the 93,000 entities are people who are already filing tax returns every year.

jgalt212 6y ago

That's a very sound argument if capital gains and wages were taxed at the same rate.

deleted 6y ago
[deleted]

dragonwriter 6y ago

> But why tax corporations at all? Because otherwise they make great tax dodges. > All of that money will eventually be income for an actual person (employees, shareholders) who will be taxed on it, most likely at a rate above 24%. No, it doesn't. The stuff that becomes employee income mostly isn't taxed as corporate income (its a deductible business expense). If it is distribute as dividends, its taxable to the recipient, but certainly that doesn't happen with all after tax corporate profits. Its very common for most investor returns to come as capital gains with the money retained/reinvested in the business.

ChrisLomont 6y ago
How are they a tax dodge? The owners are taxed whenever they try to get cash from the business. It’s like claiming a house is a tax dodge because the owner isn’t taxed every quarter in the increase in value. In both cases the owner gets taxed when gains are realized. Corporate income is mostly a way to get incremental cash for govt. But the tax comes gets paid by stocks, effectively taxing pensions, 401ks, etc., without people thinking about it. As a way to check it, there’s academic papers demonstrating every dollar held by a company is matched in market cap - company loses X in cash, market cap drops X. So the company isn’t really paying - it’s shareholders that pay. They ultimately lost the value.
- dannyw 6y ago
  Because the rich don't tend to sell their stock on regular basis for income: to maximise wealth, they re-invest. Corporate taxes ensure this tax is actually realised on a semiregular basis.
  - tootahe45 6y ago
    > to maximise wealth, they re-invest. Creating more jobs, total assholes really.

jkinudsjknds 6y ago

Apple's $200B vault of cash might disagree for conventional assumptions around the word "eventually". A corporate tax rate also encourages investment (use it or lose it), and will trend towards a greater share going to employees than shareholders all things being equal.

talkingtab 6y ago

OMG. Apple as well as other large companies are sitting on billions of dollars. In other words they are not paying reasonable taxes, nor are they spending the money so that it can or would be taxed.

qgrgergfqgfev 6y ago
sitting on money for companies of that size is not a bad idea, most would have gone bankrupt during this crisis if they had not done this.
MrPowers 6y ago
The US government wrote the Section 482 tax regulations. Corporations followed the regulations the government wrote. The government provided tons of examples on how taxpayers could follow their rules in the tax guidelines. I've spend hundreds of hours of my life reading the section 482 regs. Multinational companies need to comply with these. Never really understood the vilification of companies that are following the rules.
- notacoward 6y ago
  > Never really understood the vilification of companies that are following the rules. Your statement is based on a false axiom. Much of the ire is at companies not following the rules. It's just really really hard to untangle all of the shells and subsidiaries and internal transfers of a modern medium-or-larger corporation, so even when they do get caught they end up paying pennies on the dollar of what they owe. Or nothing. Did you hear the news this week about a certain Mr. Trump, who paid zero taxes on hundreds of millions of dollars of forgiven loans (i.e. gifts)? But hey, let's pretend for the sake of argument everyone does play by the rules. Does that make everything OK? Of course not. Those rules are a sociopolitical construct, and do you know who has an outsize influence on what those rules are? Why, the very same corporate "persons" they apply to! From lobbying to regulatory capture to the "revolving door" to outright graft, corporations use their assets to secure laws more favorable to them than any of us mere humans could get. And they make a great return on that investment. Several hundred percent minimum IIRC. Most of it's legal (true graft is only a tiny fraction of it) but that doesn't make it OK.

throwaway5752 6y ago

"Corporations don't exist, so they can't "pay" for the tax" I'm sorry, but how do you square that with the legal rights via judicial precedence they have, like those described in https://en.wikipedia.org/wiki/Corporate_personhood https://en.wikipedia.org/wiki/Corporate_personhood ? How do you square it with the plain language of the USC on the matter (https://www.law.cornell.edu/uscode/text/1/1 https://www.law.cornell.edu/uscode/text/1/1) ?

granzymes 6y ago
A corporation is a bunch of paper sitting in, most likely, Delaware. Those papers don't have a life of their own; they are owned by a group of people who also own all of the assets. We pretend that the paper is a person in lots of contexts because it's a convenient fiction. But in this example, the paper very clearly isn't paying income tax.
- notacoward 6y ago
  > Those papers don't have a life of their own Unfortunately, they do as far as the law is concerned. They have a right to own property - in perpetuity, which makes it an even more powerful right than flesh-and-blood humans have. They have a right to bring lawsuits. They have a right to influence our political process, thanks to Citizens United. They serve as an impenetrable shield between those owners and liability, and (thanks to those property rights) to a large extent taxation as well. Very little of this should be the case, but it is, and because corporations have this very substantial separate existence they should also be subject to tax.
  - ChrisLomont 6y ago
    Should? When this wasn’t the case economies sucked. When you can lose all your possessions if an investment you made fails, no one invested money. There’d be no mortgages, no college loans, no car loans, and zero growth. The LLC is credited with allowing modern economies to happen since for the first time people were only liable for the portion invested, not their entire life assets. Those countries slow to take it up demonstrably lagged economically. Go read on the history of the LLC to see how it revolutionized the world.

mbesto 6y ago

Not taxing corporations sounds controversial on the surface but is actually not a terrible idea in practice. Just push the taxes down to the employee and you could theoretically collect more taxes. They're going to dodge it anyway so all you're doing is creating jobs in other jurisdictions by attempting to tax them.