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Companies wouldn't take risks at all if you're artificially increasing the financial impact of failure. And no one would want to give loans to businesses becaus
by ziml77 5y ago
Companies wouldn't take risks at all if you're artificially increasing the financial impact of failure. And no one would want to give loans to businesses because if the business fails there would even less chance of getting paid anything back.
- daenz 5y agoI disagree with the first sentence, in particular "at all." Companies take risks because they seek profits. If their profits are not sufficient, they must take risks. If their profits are sufficient and they are risk adverse, they wouldn't take the risk in the first place, regardless of some tax on the loss. To your point though, I agree companies could be discouraged from higher risk projects, if the overall cost (and therefore tax bill) is too high for failure. Wrt to loans, I agree loans would be more risky. There would have to be an exception for taxes on new businesses, because they're going to fail at a lot of things on the road to profitability, and we should try not to let that kill them.