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> for inflation (and make up the revenue by using the ordinary income rate instead of the capital gains rate) If corp tax rate + LTCG isn't less than or equal
by nullc 5y ago
> for inflation (and make up the revenue by using the ordinary income rate instead of the capital gains rate)
If corp tax rate + LTCG isn't less than or equal to the top income rate you are effectively incentivizing changes to commercial structures to turn more gains into income to escape the double taxation -- and away from open and accessible public markets.
- AnthonyMouse 5y agoOr we could get rid of the double taxation by making dividends a tax deduction to the corporation (but taxable income to the investor). The primary purpose of corporate income tax is to keep investors from shielding their income from taxation by keeping it inside the corporation. If it's being paid as a dividend then that isn't happening. That would also solve the existing perverse incentive to defer the double taxation by hoarding wealth inside of corporations that have no productive use for it, since the corporation can "invest" it (less efficiently) for an arbitrarily long period of time without the investor paying personal income tax on it, and investor's loss of efficiency from the principal agent problem is less than the losses that would be incurred from double taxation.
- nullc 5y agoThat's a fair point, though I believe the double taxation would still exist if companies couldn't pay a 'loss dividend', which would still incentivize keeping wealth inside the corp. Otherwise it's more tax efficient to take a mixture of risks inside one entity, so that the losses in some can offset the success of others resulting in paying taxes on the true returns.