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>I don’t fully understand why corporations are taxed in the first place. Because as economically inefficient as a corporate income tax is, without it you would
by DebtDeflation 6y ago
>I don’t fully understand why corporations are taxed in the first place.
Because as economically inefficient as a corporate income tax is, without it you would create an enormous incentive for individuals to incorporate, filter all their income through the corporation, have the corporation pay all their expenses as business expenses, purchase their assets for them as business assets, and compensate them in the form of loans which never get paid back. Yes, you could write the law in such a way as to prohibit this and spend a fortune on enforcement, but ultimately it would fail against such incentives.
- cwhiz 6y agoYou can do all that today no problem.
- srtjstjsj 6y agoThat can be easily fixed by making loans taxable and payback creditable. Want a $100K loan? Get a $140K loan, pay $40K tax. Pay back the loan? Deduct from taxes.
- whiddershins 6y agoBut I can already do that using an LLC, which also doesn’t pay any tax.
- CaptainMarvel 6y agoThe UK has laws that prevent all of these things AND still has corporation tax. Expensing anything is difficult as it must be solely for the business purposes and not personal use. For example, you cannot generally expense food, clothes, housing, education etc. (You can probably expense an insignificant part of that though under some circumstances.) It’s not possible to take loans for extended periods of time without them actually counting as income for individuals (and being subject to income tax).