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I do wonder if we wouldn't be better off eliminating corporation tax entirely. The revenue of a corporation can, roughly, be: 1. Spent on goods or services fr

• ffggvv 5y ago
  i really don’t get why people get upset over share buybacks but not dividends. they’re literally the same thing. as a stock holder there’s no difference between the stock going up 10 cents from a buyback versus me getting a 10 cent dividend. other than the fact that i can have more control as a shareholder in the buy back
  • dvainsencher 5y ago
    FTFY: "they're _almost_ the same thing." Dividends lower stock price by moving cash from company to owner, buybacks increase stock prices[1] by de-diluting, so only one of those is evidence of the CEO (whose compensation is often tied to stock price) acting on his own interests. Also taxation is different. [1] https://www.investopedia.com/articles/active-trading/073015/dividend-versus-buyback-which-better.asp https://www.investopedia.com/articles/active-trading/073015/...
• raldi 5y ago
  I'm perplexed with your endorsement #2 above: Why would it be a good thing for tax breaks to end up flowing into landlords' pockets?
• dogma1138 5y ago
  Salaries come out of pre-tax revenue, any corporation can reduce their tax liability to about zero by handing out cash to their employees, yet that (almost) never happens. Same goes for financing, while dividends can only be paid out from post tax profits loan payments and even stock buybacks can be structured in a very tax efficient manner. Yet that doesn’t happen that often either.
• Pelam 5y ago
  9. Buying and controlling media for desired political outcomes. 10. Astroturfing As different sectors of business have different structures of material costs, labor costs, profit and investing. Maybe having at least some kind of equal corporate tax can be seen as being fair across different types of businesses. Additionally many forms of business have externalities which are negative for the rest of the humanity. Often it has been the public sector which has to pick up the slack or clean up the mess. Also most people agree that there exist at least some forms of infrastructure which are best managed publicly and are difficult organize privately in a way that encourages competition. Also corporations often directly benefit from different forms of public infrastructure, so in this sense it can be seen as fair to directly tax them.
  • simondotau 5y ago
    Your 9 and 10 aren’t captured by corporate tax either, because spending money reduces profit. But your 9 and 10 are captured by the income tax of the people tasked with executing these operations.
• antihero 5y ago
  1, 2, 3, 5, 8 also apply to normal people so why not get rid of income tax? The point of tax is for the government to gain money to spend on public services and what not, what you’re suggesting keeps money private.
  • golergka 5y ago
    Yes, that's also a very good follow-up idea to the OP's point.
  • ghiculescu 5y ago
    No OP is suggesting that money get to the government via income tax. As opposed to the extra layer of complexity company tax adds. There isn’t a clear equivalent where if you ditched income tax some other tax would make up for it.
• mrgordon 5y ago
  You’re ignoring that the companies can just keep lots of cash without distributing it to individuals in order to avoid taxation under your system. So for example the company can rent houses, cars, and airplanes for every employee to ensure there is not much money left to be taxed as income. On paper they look like corporate expenses but it’s really just a way to distribute money without it being taxable.
  • NovemberWhiskey 5y ago
    Perks/fringe benefits for employees are imputed income in virtually every tax system.
  • charlesdm 5y ago
    That should be taxable in the hands of the employee, obviously. Estonia seems to be doing well with their tax system, and it's pretty much exactly what is described above.
  • kapuasuite 5y ago
    Those would be taxable for the employees receiving those perks, giving away shareholders' money to employees to reduce a tax bill is absolutely nonsensical in financial, and if a publicly traded company were to do this for "every employee" (or even just management) there would be an immediate lawsuit.
  • IanCal 5y ago
    > You’re ignoring that the companies can just keep lots of cash without distributing it to individuals Nobody benefits from a company growing indefinite wealth without distributing it to actual people. > So for example the company can rent houses, cars, and airplanes for every employee If they could do this, all companies would do this already to avoid taxes. In reality, this is dealt with by (in the UK) considering those things "benefits in kind" aka equivalent to cash.
    • tw04 5y ago
      That is completely avoided if the person makes less than 12k/year though. So there is already a loophole, there just hasn’t been enough incentive to use it yet. Although I’d question if that’s why some executives take a $1 salary and the rest in stock. All of their benefits are now tax free*. yes I realize it’s nuanced and depends on country.
• BurningFrog 5y ago
  This a typical economist analysis, and I think it's mostly right. But I don't think those making these decisions think in such terms at all. People love to tax companies, because they think it's "someone else" paying those taxes. Maybe there is also some anthropomorphising going on where you think of the company as another person who is much wealthier than you.
  • acomjean 5y ago
    In the US at least companies have many rights like they’re people. https://en.m.wikipedia.org/wiki/Corporate_personhood#Case_law_in_the_United_States https://en.m.wikipedia.org/wiki/Corporate_personhood#Case_la...
    • ncallaway 5y ago
      To the point that we call the bundle of rights corporations get “corporate personhood”. (https://en.m.wikipedia.org/wiki/Corporate_personhood https://en.m.wikipedia.org/wiki/Corporate_personhood) Frankly, if OP doesn’t want me to anthropomorphize corporations for tax purposes, they’ll need to go back in time and stop the courts from anthropomorphizing them for various rights. If a company gets 1A rights under citizens united, then it can have tax obligations as well. I’m pretty over this double standard where companies are handed various rights, but not commensurate obligations.
      • BurningFrog 5y ago
        The anthropomorphizing I speculate about goes something like this: "I work hard and pay my taxes, Ford makes billions and pay much less tax!" But Ford is an abstract entity that is not a person and doesn't have a better life than you. All those billions are eventually paid to living humans, who do pay taxes on that income. This is the economist perspective, but it requires a level of analysis not compatible with rage.
        • ncallaway 5y ago
          I’m 100% fine with that perspective. However, I think it means taking away other “anthropomorphic” rights from the entity. If you say: we’ll only collect taxes from the individuals that are paid by Microsoft, instead of taxing Microsoft, that’s fine by me. But, I would then say that Microsoft also doesn’t have free speech rights as a corporation, after all each individual in the corporation has free speech rights. If we decide that a corporation *is* entitled to some rights granted to people (such as a right to free speech), then the corporation should also be subject to taxation, separately from all the individuals that compromise it. I’m unwilling to give one without the other. If a company want rights, it should have obligations. If it has obligations, then the company should have rights.
• ihsw 5y ago
  Like most discussions about taxes, it is less about the effectiveness in revenue collection and more about "fairness."
• todd8 5y ago
  Corporations pass the tax expenses on to consumers as higher prices of produced goods, lower wages to employees, and lower returns to owners that supply capital. These taxes are all paid by us but they are largely invisible and justified to the voters as making corporations “pay their fair share”.
  • deleted 5y ago
    [deleted]
  • philjohn 5y ago
    Corporate tax, as a share of total taxation in the US, has dropped from 30% to 10% since the 50's ... yet wages have been pretty stagnant since the 80's (in real terms).
    • todd8 5y ago
      The top corporate tax rate had been ~35% for roughly 25 years ; in 2018 it dropped to 21% and wage growth has indeed increased since 2018. Were wages positively affected by the lower corporate tax rate? I don’t know, so many factors affect the economy; corporations might choose to lower prices or do more research on better products or issue greater dividends to attract capital for expansion. I was just making the point that we humans end up paying somehow for the spending that the government chooses for us and that I would rather make these tax costs more visible to the people actually paying the taxes.
      • CalChris 5y ago
        Average effective tax rate for corporations is considerably less than the top rate, so much so for companies like the FAANGs as to make a mockery of corporate tax as being anything more than a guarantee of full employment for tax attorneys. OTOH, brick and mortar which has to compete against Amazon has the privilege of paying for Amazon.
  • ipaddr 5y ago
    These taxes are paid by various stakeholders and entities around the business. The public gets the tax income and uses it for services to allow the business to operate. Do you feel the cost/value of having the ability to a call a number and have a well trained team put out a fire in minutes that could ruin your business is 0 or free? What about rules/services that allows your business to have an advantage over another in a different region? Taxes need to be paided by everyone. Corporations use more services than you would think and rely on a stable government that they need to contribute to.
• obventio56 5y ago
  I think some people would find issue with the distribution of wages paid in #4.
  • WanderPanda 5y ago
    Then again there are hefty (progressive) income taxes involved. The worse the distribution the higher the tax revenue.
• swiley 5y ago
  9. Just kept in a large pile like Apple does.
  • op03 5y ago
    More like a large mountain range.
  • nickpp 5y ago
    Apple's cash reserve hasn't grown in a while since they are spending it on stock buybacks and dividends. But the very reason they didn't repatriate it and spend it in the US is the corporate tax the GP is arguing against.
  • rjknight 5y ago
    This is really a case of 8. I doubt that Apple has an account full of US dollars, and I mentioned that low yields on safe investments is already a way of “taxing” this money in order to encourage spending or riskier investment.
  • simondotau 5y ago
    I don’t see how that’s a problem. It’s just delaying the inevitable taxation of that cash. It’s not avoiding it.
• ajmurmann 5y ago
  Buybacks to a large degree end up not being taxed or only much later. Most people are holding on to stock for long periods now. Behavior can also often be easily be adjusted to capital gains tax. Extreme example is Larry Ellison buying in island with a loan backed by his stock rather than selling the stock and buying the island from that directly.
  • BbzzbB 5y ago
    Isn't that just how every billionaire "spends" money tho?
    • ajmurmann 5y ago
      If it is, it undermines the point that buybacks get taxed
      • BbzzbB 5y ago
        Buybacks are effectively identical to dividends so that end it would be accomplished
• awillen 5y ago
  People's attitude towards Amazon is the biggest counterexample of this. They have avoided a lot of taxes not through nefarious means, but by constant reinvestment (items 1-5). At some point, when a company is bringing in enough revenue, a lot of public attitude seems to be that it should be paying taxes regardless of whether it's investing that revenue in things that we generally see as positive.
  • nickpp 5y ago
    Which "people"? Consumers are delighted with Amazon, otherwise Amazon's revenue would dwindle. Investors, even more. I think the attitude you are talking about is largely driven by media.
    • awillen 5y ago
      The main reason Amazon is paying a $15 minimum wage is because of substantial pressure from progressives - there's an extensive record of this. The media reporting has largely been coverage of Bernie Sanders and the like, so it's pretty clear that there are non-media folks who have been driving it.
      • nickpp 5y ago
        Artificially putting a floor under the price one's allowed to charge for one's services benefits only politicians proposing such populists ideas and the non-working.
        • SturgeonsLaw 5y ago
          Spoken like someone who's far away from minimum wage. One would think it also benefits the people who receive the wage increase, yeah? My country has a $20 minimum wage, and yet the unemployment rates, small business survival rate, and inflation are all around the same levels at the USA, so all the talk of impending economic catastrophe if we give poor people a few more crumbs seems to be hot air from where I'm sitting.
        • 5y ago
• runarberg 5y ago
  I’m of the opinion that there should only be income tax (paid as a function of standard deviations from from the mean wage on the logistical curve). And all personal profits should be considered income, including sold shares, paid dividends, earned interest, etc. However I can see how that system would be abused. E.g. instead of buying that yacht from your personal money (which you need to pay 70% tax on when you transfer it from the company) you simply have the company pay for it and say this is a company yacht. Then I can see how people would continue to hide their wealth in off shore shell companies that they never have to pay a tax on. So even with this scheme it is still ripe for tax havens.
  • ncallaway 5y ago
    This seems sensible to me, so long as I’m allowed to use corporate personhood to tax a company’s income under this scheme. If your money counts as speech because you have first amendment rights, then your income counts as income because you have IRS obligations. I’m 100% over letting corporations pick some of the benefits of citizens but skate away from all the obligations. If you want the rights, you get the obligations. If you don’t want the obligations, you don’t get the rights.
  • heliodor 5y ago
    How about the self-sustaining farmer who doesn't need to work in society? Completely capable individual, has a certain way of life, and suddenly they don't need to contribute? How about the person who has so much wealth that they will never need to work in their life? Government is labor that benefits the people. The only way an individual can escape the duty is if they are incapable or if society deems that they deserve a break. Taxing only income misses the mark by a bunch.
    • ipaddr 5y ago
      They would pay property taxes at the city level and other fees still.
    • runarberg 5y ago
      Indeed. Which is the reason why my conclusion was opposite to the opinion. The real world gets in the way of it being practical. But in my ideal world inheritance is considered income and is taxed as such. And on a logistical curve a billionaire inheritance is taxed really close to 100%. Anybody that has earned so much money they no longer need to work has paid as much in taxes (and continue to do so as interest is taxed as income). Additionally on a logistical curve it is almost impossible anyway to earn this much since a huge earning is taxed close to 100%. For example, someone making 5 standard deviations above the mean pays 99.33% tax on it, so they will probably end up with less after taxes then someone earning 2 standard deviations below the mean (11.92% tax). As for the farmer who is self sustaining. I guess they are not using up much of the shared infrastructure anyway, I see no need for them to be paying taxes.
• StopHammoTime 5y ago
  Here’s an idea, let’s charge tax on revenue and it can just be the cost of doing business. Small businesses get a tax holiday for the first few years. Problem solved.
  • sokoloff 5y ago
    Taxes on revenue create strong incentives for vertical integration and consolidation (because there are fewer links in the chain to be taxed). If one entity owns the farm, the food distribution, and the grocery store, they have one revenue transaction to be taxed. A small farmer selling their eggs to a distributor who sells them to the grocer who sells them to you is taxed three times on what amounts to same activity.
    • kaveh_h 5y ago
      This is perhaps true of revenue tax. But for VAT You can deduct VAT of sales from VAT of purchases.
      • sokoloff 5y ago
        Indeed. Which is why VAT is a much better and more common structure of taxation than a tax on all revenue.
  • kapuasuite 5y ago
    Why tax a corporation's income at all when you can tax its shareholders income instead?
    • jakeinspace 5y ago
      Well, the shareholders may live in a different area or country than the one in which the company operates. If a corporation is largely owned by American investors, but does its production largely in a developing nation (relying on their infrastructure to operate), then I think it's fair to say that both the developing country and the US should both get a slice of the pie: 1 for providing the infrastructure and labor market, and the other for providing the comforts of a developed country to shareholders.
• bradleyjg 5y ago
  One problem is that this would effectively distribute tax revenue from a company by the citizenship of the owners (6 and especially 7) but most countries think they are entitled to some tax revenue from companies operating in their nations even if the company is wholly owned by foreigners.
  • sudhirj 5y ago
    That’s usually the case of any kind of operation, no? If you use the infrastructure and services of a particular country its seems reasonable to pay taxes on your profits there.
    • bradleyjg 5y ago
      It does seem like a reasonable principle, which makes abolishing the corporate tax unpersuasive. If there were only a single jurisdiction the argument would be more compelling.
      • zemvpferreira 5y ago
        It certainly isn't impossible for nations to tax foreign individuals operating companies locally without a corporate tax. A way would be: a) similar to KYC laws, make knowing all persons who own part of a company mandatory, regardless of how many structures (corporations, trusts, whatever) you have to go through. b) preemptively tax every individual on profits/salaries/perks/payments from the company at some established rate. c) come tax season, ask for a global income statement from everyone taxed. Adjust their taxes based on whatever bracket they land in.
    • magila 5y ago
      Even without a corporate income tax companies would still generate tax income in foreign countries where they sell goods and services, e.g. VAT/sales tax. They would also pay property tax on any physical presence they maintain and probably a myriad of other taxes depending on the country.
      • 5y ago
• cycomanic 5y ago
  This is brought up again and again. You can make similar arguments for every tax. In fact let's look at income tax. The money people spend on income tax they could spend on. 1. Spent on goods or services 2. Spent on rent 3. Spent on capital purchases 4. Spent on debt repayment or other forms of financing In fact income tax does not have the last two points that you admit are bad, so maybe we should eliminate income tax and use corporate tax only? The thing is low corporate taxes create an inequality between labor and capital gains. It's already the case that wealth inequality is quite unrelated to income inequality, the highest wealth individuals often don't register in the high income brackets.
  • kapuasuite 5y ago
    Capital gains taxes (paid by shareholders) are completely separate from corporate income taxes (paid by corporations). You're also forgetting (or ignoring) that the legal incidence of a tax and the economic incidence are completely separate. For example, employers and employees are both legally responsible for paying a portion of payroll taxes, but economically speaking that tends to lead to lower wages, making the employer's portion fall at least partially on the employee. https://voxeu.org/article/effects-employer-payroll-tax-cuts https://voxeu.org/article/effects-employer-payroll-tax-cuts
    • cycomanic 5y ago
      I'm a bit confused by your post, it seems you are agreeing with me, but you say you disagree? I am aware of the difference between capital gains tax and corporate tax (also note that not every country has a capital gains tax). My argument applies to both, i.e. one of the reasons for raising inequality is the inbalance of labour and capital and the low corporate and capital gains taxes definitely contribute. About the effect of income tax on salar, I'm not quite sure what that has to do with my points. I was not arguing that we should eliminate corporate tax and just let income tax handle it. Unless your argument is we should use income tax instead of corporate tax because it lowers salary?
      • kapuasuite 5y ago
• raverbashing 5y ago
  Ending corporate tax would be an interesting proposition and it would be interesting to study the possible effects of that However I think the main downside on the abolition of corporate tax is that companies are hiring even fewer people with time (automation, subcontracting, etc) so the taxation "opportunities" are reduced if you only have "payroll"/income taxes and sales taxes. The current situation leads to things like Starbucks having an exaggerated advantage over local cafes for example, since they 1) pay much lower effective tax 2) can have more advantageous rental agreements which leads to some ridiculous situations where one Starbucks is visible from another. (Though yes, governments do overtax people and companies IMHO)
  • kapuasuite 5y ago
    The government could tax shareholders, i.e. the people who receive a corporations profits to begin with.
• PaulRobinson 5y ago
  If you’re going down this route, many will argue that all forms of income tax are equally “wrong”. Henry George - a 19th century political economist - proposed exactly this, and suggested the only thing that should be taxed should be land: impossible to hide from a tax inspector, potentially a waste to the public commons if useful land that could be exploited isn’t and you can even protect land you wish to keep pristine more easily (tax it very, very highly). His ideas are now considered eccentric, but I do wonder if the World would be a great deal simpler if globally we moved to a Henry George system and stopped trying to tax sales, income and everything else going we do.
  • MrPowers 5y ago
    The deadweight loss of taxation is much lower for a land tax than an income tax. The deadweight loss is the economic resources allocated to complying with the tax. The armies of tax lawyers would be able to perform other economically productive activities if they weren't pouring over the tax code. Pigovian taxation is even better. Taxing gas is a great example. Gas consumers emit carbon which has a cost for society. We should make them pay for this negative externality via a gas tax, so their consumption is economically optimal. This is how to prevent the Tragedy of the Commons. I'd argue that some taxes are objectively better than others and not all equally wrong.
    • lars512 5y ago
      As an Australian who moved to Sweden, I was amazed at how efficient the Swedish income tax process was. The government already knew everything they needed to calculate your return, and gave it pre-filled. There were not endless exemptions. Nobody at my work used an accountant, most approved their tax with a few clicks and were done. So much more efficient than in Australia!
      • throwaway894345 5y ago
        The American tax system is similarly frustrating. I’m a senior engineer and I have a hard time navigating tax forms even with the help of Intuit, and it frustrates me that I have to pay Intuit (or someone else) to help me do taxes which are complicated in large part because Intuit et al lobby for complex tax codes and against the sort of Swedish model you describe. Worse, when I moved to Chicago the state of Illinois wouldn’t even accept my taxes electronically because their form required one of a handful of authentication methods—the only one of which that ought to have worked for me was to use my Illinois driver’s license number—a 12 digit sequence; however, their form only permitted 8 digits. It was a significant hassle just to get them to take my money. I’ve also had difficulties figuring out how much to withhold. In the US they give us a form that calculates “allotments” (or something—I forget the term) but it’s unclear whether more of those correspond to more or less withholdings and in any case the form computed incorrectly for me for several years (I’m sure it was user error somehow and senior engineers are just not reliably smart enough to figure it out, even with the help of HR) and I would end up owing thousands in taxes as well as a separate penalty for not withholding enough. It’s maddening that our government makes it so difficult for earnest people to pay their taxes.
• world_peace42 5y ago
  Wouldn’t that exacerbate the tech giant problem? Currently their war chests only get opened to vulture up fledgling companies. I’m not saying it can be instantaneously transmuted into gold if the government tried to take more, but I can’t see your proposal alleviating that problem.
• SMAAART 5y ago
  that is an idea that I've been floating for a while, unfortunately people who don't understand economics and rely mostly on their feelings don't approve, and those are the majority of votes hence the politicians don't want to commit political suicide by promoting something like that. Think about it, a no tax corporate tax, yet taxing the recipients of dividends and distributions would: * eliminate tax heavens * foreign companies would come to the US * stimulate the economy * benefit the shareholders at large Of course the shareholders would pay taxes, and distributions to foreign entities could be taxed at the source. Easy, smart, logic.
  • Strom 5y ago
    This is how corporate taxes work in Estonia. There is no income tax, but dividends/distribution is taxed. I think it's great overall. However there are some loopholes that companies still figure out. In Estonia's case we have big international banks that found a juicy loophole. The local Estonian branches pay no corporate tax, but they also never pay dividends. Instead they give out a no interest loan to their foreign mothership and have no intention of ever getting it back. This loophole has since been patched, but it shows that companies will still hire teams of lawyers to find new loopholes to not pay a single cent.
    • SMAAART 5y ago
      Let's face it, no regulation can ever be perfect, make rule(s) and someone will find loopholes, then... close the loopholes and the cycle continues. That is life. And that should not be an excuse to impede improving society.
• another_poster 5y ago
  All taxes are avoided (or illegally evaded) to some degree, and the most taxed (i.e. the wealthiest people and firms) will always have the largest incentive to avoid taxes. To reduce the incentive to avoid taxes, countries often tax capital (or labor) at multiple stages but with lower rates (e.g. a corporate tax, dividend tax, and sales tax). As you point out, the corporate tax is redundant to other forms of taxation, but the redundancy lowers overall taxation rates and hence tax avoidance. So it's a feature not a bug of modern taxation. Some interesting alternatives to corporate taxation have been proposed[1][2], and I think they merit consideration for their potential to remove disincentives to invest or hire labor. I personally like Michael Pettis's argument that continued economic growth depends on increasing economic demand through redistributing wealth from capital (or more generally the wealthy) to labor [3], so I am skeptical of reforms that stop taxing capital. [1] https://cdn.americanprogress.org/wp-content/uploads/issues/2010/12/pdf/auerbachpaper.pdf https://cdn.americanprogress.org/wp-content/uploads/issues/2... [2] https://taxfoundation.org/value-added-tax-revenue-neutral-alternative-corporate-income-tax-0/ https://taxfoundation.org/value-added-tax-revenue-neutral-al... [3] https://foreignpolicy.com/2020/09/29/capital-flow-united-states-economy-trade-deficit/ https://foreignpolicy.com/2020/09/29/capital-flow-united-sta...
  • elcritch 5y ago
    > I personally like Michael Pettis's argument that continued economic growth depends on increasing economic demand through redistributing wealth from capital (or more generally the wealthy) to labor [3], so I am skeptical of reforms that stop taxing capital. This is an important point, and is misunderstood in (US) politics and deabtes, IMHO. Supporting capitalism and taxation aren't mutually exclusive positions. Well thought out taxation is crucial to balance the inherent network effects of large corporations. There's huge network effects, especially in tech [1], that leads to less ability for smaller firms or new players to compete. If anything, I'd wager that appropriate taxation of network effects is crucial to a well functioning capitalist society, especially as so much of success is due to luck and network effects in addition to hard work and talent [2]. Just because you have capital doesn't mean you have capitalism, where most any individual(s) can access capital to bring about new companies and products. The trick is defining empirically and scientifically sound taxation measures rather than giving into simplistic models of Socialism or Reganism. 1: https://medium.com/@nfx/70-of-value-in-tech-is-driven-by-network-effects-8c4788528e35 https://medium.com/@nfx/70-of-value-in-tech-is-driven-by-net... 2: https://arxiv.org/abs/1802.07068 https://arxiv.org/abs/1802.07068
• yojo 5y ago
  Here’s a different lens: tax is a mechanism for determining who pays for shared infrastructure and social services. Any entity that has to pay obviously has other ways they can more productively (as seen from the entity level) deploy the cash. But ideally we are not optimizing for a single entity or class of entity, we’re trying to optimize at the societal level. We know that corporations can bear some burden, because we are taxing profits. I couldn’t tell you whether this is an optimal place to tax, but it intuitively feels reasonable - corporations are large non-governmental concentrations of wealth and power. This seems like a valid pool to tap for funding the state, and better than many alternatives (e.g. taxing the poor and powerless).
• riffraff 5y ago
  This does not address the issue this new tax agreement is supposed to tackle: that big companies produce income in country X but shift profit to country Y where it is taxed less, effectively extracting wealth from the first. If you only taxed dividends the problem would not go away.
  • Aerroon 5y ago
    How would it not go away? If there's no corporate tax then the profit is going to be taxed at 0%. Moving that money around won't help you. But if an investor wants to personally use that money, then they'll have to pay personal income tax in the country he's in or is a citizen of.
    • riffraff 5y ago
      Because the problem would be that "Jeff Bezos has extracted X money from France" instead of "Amazon has extracted X money from France". The problem is not that the money disappears from earth, but that is shifted from one country to another.
• Taniwha 5y ago
  If you're going to legally treat corporations the same as actual humans - then tax them the same. We pay taxes for services we expect from governments, defence, policing, justice, water, sewers etc etc I don;t see why corporations that use all these things shouldn't pay their share
  • valenterry 5y ago
    Exactly this. Imagine a company that has makes X dollars and spends X dollars. So the company pays no tax. What that means is that all the other tax payers pay for all the infrastructure. And that's fine, but if such a company ever needs to call the police and go to court, etc., they then would have to pay all of that out of their pockets (i.e. the work of the police, the lawyers and judges, and so on).
    • peoplefromibiza 5y ago
      the fact that streets are illuminate at night and pollice patrols them is using services provided by taxpayer's money. Uber benefits from streets more than the average citizen. if corporations had to pay per use, they would prefer to build their private infrastructures and police forces, while public infrastructure would lag behind chronically underfunded.
      • lostcolony 5y ago
        I'm not entirely sure why you think what corporations -prefer- matters when it comes to a discussion on taxation?
        • bumby 5y ago
          Well they have a right to petition the government in the US at least. Would you say the same about what citizens prefer does not matter in a representative democracy?
          • lostcolony 5y ago
• MuffinFlavored 5y ago
  9. Pocketed by corporate executives / board members Trickle up economics, right? Now make a list of all of the things the money could do if it is taxed and gets to the government. Schools, roads, etc.
  • simondotau 5y ago
    Pocketing corporate money is illegal. If they do it legally, it’s taxed as income/dividends/capital gain. I don’t see the problem.
    • MuffinFlavored 5y ago
      if corporations paid less taxes that means more of the revenue could go into the profits section which would most likely end up in the pockets of greedy board members. is that a bad assumption?
      • Aerroon 5y ago
        And they would pay personal income taxes on that money.
      • simondotau 5y ago
        Yes, a bad assumption. Corporate profits cannot end up in the pockets of greedy board members without being taxed.
• pera 5y ago
  When companies generate more profit they very rarely do any of the things you mention, why would they start doing it if they didn't have to pay taxes at all? In reality when a company gets to generate more profit the result is an even bigger gap between C-levels and normal employees salaries. Here is a better idea: companies should be the only entities paying taxes in a capitalist society. If you think about it it really makes perfect sense :) since they already do all the boring accounting stuff and with the power of their lobbies they could make tax law simpler and more efficient (something that normal citizen will never be able to push forward).
  • nohuck13 5y ago
    > when a company gets to generate more profit the result is an even bigger gap between C-levels and normal employees salaries. This is #4 "spent on wages" no? We already tax wages. A graduated income tax targets specifically the problem you are flagging here. Taxing corporations exclusively would do away with this. If you're making an equity argument, why not argue for the opposite of what you're saying: reduce corporate taxes to zero, then make up for it by taxing only the highest earners' wages? Not advocating for a policy position here, just pointing out that the argument in the GP post is precisely that they lack of those granular policy levers is a drawback of taxing corporate income. Policy levers which could be used to nudge the income gap down by taxing the "excessive" executive comp at a higher rate, for example, don't work if you collect that tax revenue as a monolithic corporate profits tax.
    • pera 5y ago
      To me "spent on wages" means on every employee's salary, not only the top 0.01% It would be pretty awesome if companies increased salaries for everyone at the same proportion of their interment of profit.
      • nohuck13 5y ago
        Yeah but you gotta use the tax code's definition of wages when arguing about the tax code ;) > It would be pretty awesome if companies increased salaries for everyone at the same proportion of their interment of profit. It would be pretty awesome if corporations didn't pollute our air too. But corporations are sociopathic profit maximizers. Presumably you support regulating their emissions, rather than just wringing your hands at the bad people. Moral suasion arguments are not effective as tax policies.
• Misdicorl 5y ago
  The problem I don't see addressed is that no/low corporate tax leads to bad market incentives. It is more efficient for my company to buy me things than for me to buy me things. But my company will inevitably buy inoffensive/cheap things that appeal to all employees rather than what I really want. This is most often implemented as a food perk or car perk, but obviously extends to almost any consumable purchase.
  • Aerroon 5y ago
    Aren't those usually limited though? Ie a company can only give $x in perks per employee and everything above that is taxed in some way?
    • Misdicorl 5y ago
      Only if it's not a legitimate business expense. Which in practice means if you get a meal with coworkers and talk about work it counts. Even easier if you have clients
• Black101 5y ago
  9. Kept in cash Like Apple likes to do: https://www.cnbc.com/2020/10/29/apple-q4-cash-hoard-heres-how-much-apple-has-on-hand.html https://www.cnbc.com/2020/10/29/apple-q4-cash-hoard-heres-ho...
• suchire 5y ago
  The main issue tackled here is that multinational corporations operate across borders, and thus create problems of capital flight out of a country. Thus, even if the economic activity is almost entirely happening within a country (e.g. a local shop uses locally targeted online ads, sold by a sales team working out of a local call center, to attract neighborhood customers), the profits could be captured somewhere else, like an Irish subsidiary handling profits from continental Europe. Even if those profits get reinvested or distributed to shareholders, they might not get reinvested or distributed in that country where the revenue was generated.
• ineedasername 5y ago
  I don't think corporate taxation has always been this bad, so there's no reason why is should be impossible to return. To something reasonable. And while 1-5 are good, they don't pay for the massive infrastructure and other investments that governments have made the enable corporations to do business in the first place. Those resources have to come from somewhere. I don't see it likely, for example, for dozens of corporations to come together and fund interstate highway and bridge maintenance. I might agree with you more if corporate profits were plowed back into higher pay or better benefits for employees, significant voluntary investment back into society, etc. But benefiting from government investments in their ability to do business without paying taxes essentially means they are extracting their profits indirectly from all individual tax payers whether or not they are even customers. I do #1, #3, #4, #5 and I'm still expected to pay taxes.
  • parineum 5y ago
    >they don't pay for the massive infrastructure and other investments that governments have made the enable corporations to do business in the first place Firstly, that infrastructure is for everyone to use and I think it's semi-useful to view private business as infrastructure as well. They exist to provide goods and services to the people. Second, it seems obvious to me that you'd simply increase other taxes to make up the deficit. The impulse to create special taxes is a bad one, imo. It only serves to complicate the tax code, obfuscate how much we're actually paying in taxes and makes it more difficult to actually provide incentives when they are needed.
• tmpz22 5y ago
  Are you kidding me? All of modern history points to the money being spent on only one thing: executive compensation. You really things the wealth of the world should prioritize Zuckerberg buying another island in Hawaii??
  • fallingknife 5y ago
    Zuckerberg's salary is $1. The billions of dollars he has come from his equity share from, you know, founding the company.
• nostrademons 5y ago
  This is the case with any form of government financing - taxes, deficits, and inflation all introduce market distortions where they reduce productive activity. This is inherent to economics, because a basic principle is that there is no free lunch: if you are going to spend resources on spending, those resources have to come from somewhere else, and the private sector by definition is the "not public sector". But if you don't accept these deadweight losses, which means that there is no way of funding a government, which means that the essential services a government provides - notably a monopoly on violence and a peaceful way of adjudicating disputes - no longer exist. This is more damaging to businesses - when business every business needs to hire a protection racket to avoid being ripped off and killed, productive activity tends to come to a halt.
  • pitaj 5y ago
    Different taxes have different amounts of dead weight losses. For instance, land value tax has no dead weight loss. Corporate tax has one of if not the highest dead weight loss.
• ericjang 5y ago
  I agree about the "corporate tax creates work in tax avoidance", but if corporate taxes are abolished, wouldn't it drive more individuals to incorporate their own businesses? The tax avoidance industry now shifts to servicing individuals, and again we find ourselves with inequality between individuals who can afford those services and those who cannot. An alternative way to tax would be to simply raise interest rates, and discourage capital from not being deployed productively.
  • kumarvvr 5y ago
    Incorporation and maintaining related documentation is a tough job. I guess one solution could be to classify various types of corporations and tier them. And then tax rules change accordingly. Similar to how tax breaks are given to startups.
  • nojokes 5y ago
    If they want to use their money then they have to pay dividends or wage.
    • reedjosh 5y ago
      Unless they run a catering business out of their home. They need furniture, computer, food, and a home for that business, so boom...using the money 'for the business' tax free.
• rubyn00bie 5y ago
  No. We would not be, just as we would not benefit from taxing corporations at 100% either. There is a sweet spot, where the amount we tax generates more than it costs, this is known as the "fiscal multiplier." Tax breaks are among the worst incentives ever to exist and have the lowest net-return to society. A corporation paying no taxes, is then completely freeloading off of the countries they operate within. Tax breaks are handouts, full-stop. Tax breaks ONLY increase deficits by necessarily decreasing input (tax revenues) without a corresponding decrease in costs or increase in output. It's literally saying "you don't have to pay your share of taxes because you already make so much money." This is the precise reason Republicans run up the deficit. No one realizes tax breaks are a fucking hand out, we have a budget. "Tax breaks" are just the same kind of spending as food stamps, except they provide a negative return where as food stamps provides a positive one with something like a 1.73 multiplier (which is fucking awesome[1]). If we were taxing multinational corporations at a 70% tax rate, sure, then maybe a tax break might actually help stimulate some growth... but we sure as shit ain't even close yet. The corporate tax rate should be something like 35% in the USA, but if you do the math it's closer to 17.5% on average that's paid (or was when I checked a couple years ago, I can't imagine it has improved). I can promise all of you, that the overwhelming majority of corporations aren't able deploy international tax avoidance strategies (and are paying really close to that 35%). So... then, 'cuz like averages, 'n' shit, that means (did I get a pun?) a handful of extremely large players are likely paying literally nothing in taxes to get the USA's average rate down to 17.5%. It's pretty easy to go calculate these numbers for yourself, and to look into what things actually cost. I'd recommend anyone and everyone go take a gander at https://www.bea.gov/ https://www.bea.gov/ and actually go do it. [1] https://en.wikipedia.org/wiki/Fiscal_multiplier https://en.wikipedia.org/wiki/Fiscal_multiplier
• Neil44 5y ago
  None of those things directly go to improve society and infrastructure though.
• justicezyx 5y ago
  Hmm, insightfully looking but profoundly ignorant. Take a look at the history of tax. And make a judgement on the necessity of tax yourself. Stop wasting time coming up with some seemingly clever explanation of things. https://en.m.wikipedia.org/wiki/Tax#:~:text=The%20first%20known%20taxation%20took,based%20on%20annual%20income%20amounts https://en.m.wikipedia.org/wiki/Tax#:~:text=The%20first%20kn....
• dehrmann 5y ago
  > ...dividends and buybacks create income for individuals who will pay tax on that income) This is an important point people miss. The owners of those companies eventually pay taxes on the profits, so a corporate tax is a double tax. There are a lot of things that get taxed: property, income, sales, corporate profits. You can vary these rates and still come up with a viable government revenue model. Oregon doesn't have a sales tax; Washington state doesn't have income tax. The only problem, and it's what this deal is about, is when these varying policies interact, or one jurisdiction does something very different from others. What you end up taxing is a social policy lever, but it's otherwise not all that important. The important part is getting some degree of alignment so you don't encourage people to live in Vancouver, WA, but buy everything in Portland.
  • marcosdumay 5y ago
    > The owners of those companies eventually pay taxes on the profits, so a corporate tax is a double tax. Will they? Countries have a wide set of positions from "tax only corporate income" to "tax only dividends", with a lot of them sizing both taxes taking the other one into account.
• bgroat 5y ago
  I think this idea, but I always thought that a country or countries should just be on the cap table. Forget tax, but if I want access to the Canadian grant ecosystem they take 7%. I want Delaware Chancery courts the U.S takes 8% Swedish bank secrecy, 6% And we access states more like VCs and their value add. Obviously all numbers are made up
  • Negitivefrags 5y ago
    How is that functionally different than how tax works now? Ownership gives you two things. It's a right to future profits, and the ability to resell that right to someone else. Company tax gives the government a percentage of the profit, and capital gains tax gives them a percentage when the shares are sold. The only thing your proposal would do is delay when the government gets it's slice because the company doesn't have to pay a dividend right away.
• kileywm 5y ago
  One thing to keep in mind is the non-monetary side of taxes: they are used to influence behavior. Offering employee benefits (healthcare, retirement, etc.) is incentivized by US tax code thus influencing more companies to do so. I'm not saying that corporate behavior becomes uninfluencable when profit taxation is removed, but rather that it will require a different incentive mechanism. That is assuming that we still want to influence corporate behavior through government without legislating it.
• celticninja 5y ago
  Why should a corporation not pay taxes to support the infrastructure they use (which is paid for by taxpayers) to undertake their business. Amazon ship a lot of goods, that is a lot of road miles. I pay toward the upkeep of the roads and I get considerably less use out of them than Amazon do, in fact they are vital in order for Amazon to do business, so they should be willing to support it. The only reason they dont (support it) is because they are rich enough to argue with the government over it, and that argument is not due to ideological reasons, rather it is because arguing (in court) is cheaper than paying the taxes. So it is just because it is financially beneficial, even if the net effect is negative to society.
• ashtonkem 5y ago
  Absolutely not. Not only is this massively regressive, it ignores how much of our public infrastructure is built to support the economy. This proposal would effectively allow shareholders to turn infrastructure tax dollars into shareholder money without having to kick a single dime into the bucket. That’s absolutely nuts.
  • rcpt 5y ago
    The conversion into shareholder money is where the tax happens. The idea is that if you want to tax rich people do it directly. Don't make it complicated.
  • Aerroon 5y ago
    The economy is part of the infrastructure. That's why governments go to extreme lengths during economic problems. If the only store in the village shuts down it sucks for the store owner, but it sucks even more for the villagers who now have no access to the goods.
• didip 5y ago
  I am with you, we should tax on things that are undodgeable and stop this wasted energy on corporate taxes. * Property tax is 1 obvious place, you want the land in this country? You pay the tax for it. * VAT is another obvious one. You want to sell in this country? You pay the tax. There are plenty of things that can be taxed which are undodgeable, we just have to be creative.
  • cowl 5y ago
    How is VAT the obvious one? The practice is far from theory. VAT is effectively a tax on consumers not on corporations.
• scythe 5y ago
  Why not just tax buybacks? When a company buys its own stock, it pays a tax on the value of that stock to the government. Sure, this makes stock prices lower. But it encourages dividends by comparison, which is probably a good thing, or at least everyone seems to think it is, and then these are taxed as regular income (not usually subject to gains rate).
• ondross 5y ago
  This would make total sense if the entire world were under one tax system. Taxing corporations is a way of of taxing the dividends of shareholders outside your country, whose income you can't tax individually.
• kebman 5y ago
  This is not about fairness nor liberty. It's about control; incentives and subsidies, made to keep the big bosses in check, and also about making sure they don't get undue competition, since taxation like that makes it harder to compete with the giants, by both outsiders and by smaller companies since margins are lowered. In short, it's about stability and keeping up the status quo of the too big to fail.
• noobermin 5y ago
  I love the imaginary world where people debate this based on hand waving and I suppose emotional feelings and how it literally contradicts recent memory[0]. The debate is over, just like for trickle-down economics because the results have long been in, so at this point the only reason I can surmise is people who make this argument are either ignorant or selective of the facts they use, are disingenuous, or are just too high on their own supply to really interrogate it. [0] https://apnews.com/article/438fae12f9204b1fbd8e8b1985ae554f https://apnews.com/article/438fae12f9204b1fbd8e8b1985ae554f
• kart23 5y ago
  Didn't uber, lyft, et. al just spend $100 million on getting prop 22 passed?
• rsync 5y ago
  "All that the corporation tax adds to this picture is the creation of work in tax avoidance services, and an unjust inequality between those firms that can afford those services and are structured to take advantage of the rules, and those that can not and are not." This already exists in the United States. An "S-Corp" is a passthrough corporate entity wherein the corporation (or partnership) is not taxed at all and all profits flow to the owners of the entity who are then bound to pay the taxes on their personal returns. Almost all small businesses incorporated in the US are such entities. It is not exotic in any way and is totally accepted and normal. The trick is ... With some minor exceptions, all of the profits need to flush out of these passthrough entities every year. You can't just keep piling up untaxed profits in the company bank account. The corporation is required to disburse the profits and create taxable income for the owners. Big coporations which are not passthrough entities can keep the money and do not have to disburse it ... but they have to pay taxes on it. So there are pros and cons to these structures. I personally feel that passthrough corporate entities are much simpler, much more comprehensible and do not have the societal inefficiencies (pursuing tax avoidance strategies, for instance) that you mention. But at the same time I think we're asking for trouble if we let (big multinationals) just pile up bigger and bigger mountains of cash in their bank accounts, untaxed. So, in absence of a better solution, taxing non-passthrough entities seems like the least worse solution ...