> Because, in some respects, C-corps would then become more like S-corps, in that a significant amount of untaxed income would flow through as dividends to shar

> Because, in some respects, C-corps would then become more like S-corps, in that a significant amount of untaxed income would flow through as dividends to shareholders where it would now be taxed at the normal income rate. Some respects yes, but not in one important aspect: With an S-Corp, the income must flow on an annual basis. If you removed C-Corp taxation, there would be no reason to have an S-Corp. You can just leave the net gains in the C-Corp (tax-free!) and take it out whenever you want.