It would be perfectly fine for corporations to pay comically low taxes--- IF they also had NO ability to fund large-scale lobbying operations and were not allowed to put unlimited amounts of money into political campaigns. That's NOT ever going to happen.
But now is the best time for the tax part to change. The economy has been floated by unprecedented government pay-outs, narrowly avoiding a deep depression that would have crushed even the most cash-flush corporations. If certain people have their way, the working class will foot the bill for this for decades to come. Maybe it's time for those who thrived through this to pay their share just like in the post-WWII era where max tax rates reached 80+% up until the early 60's?
For the privilege of continued access to a workforce that was educated by public schooling
For access to roads that are maintained by tax dollars
For environmental damages and other negative externalities that the tax payer has to pay to clean up
For an army and police system that allows the flow of commerce to continue without attacks and interruption
For a sovereign wealth fund if there is a surplus of tax revenue one year
For a court system so that corporations can continue to sue each other
To secure the population access to vaccines to reduce the spread of Covid and other diseases
To fund libraries that help the local population
To build sea ports and airports that provide the economy with better trade and transportation
These are some common things taxes are spent on but they are not reasons why corporations shouldn’t pay taxes on their free cash flow, revenue, or some other financial statement line item (FSLI) instead of their profit.
You’re describing taxes. But why specifically taxes on profits? Why not taxes on things like property? Payroll? Sales taxes on things they buy? The myriad of taxes their employees pay?
We now have a situation were the tax code is intractably complex because of DECADES of finagling by the wealthy and their corporations to set things up strictly and shamelessly in their favor.
Sorry, but I just can't feel any sympathy for corporations and the wealthy who reap massive profit, in part, because they've long ago set up loopholes and laws to avoid paying a fair share.
So what is a fair share? Well, for starters, one that doesn't rely on a 2+ million word tax code and reams of related laws most of which serve to make exceptions for the wealthy.
If you strictly and only tax consumption and property, you will have large segments of the population living hand-to-mouth, trapped in a vicious cycle of poverty and and hard labor in a hole that requires super-human or generational effort to get out of. Meanwhile, those who started with a leg up will continue to accelerate their net-worth. There are people who "make money" by "having money" and under your rules those people would only pay taxes on the fees they pay to their money manager. We aren't THAT far from that now were it not for the miserly 15% investment income tax.
I realize the typical HN-libertarian-calvinist view is that everything needs to be transactional. Transactional down to the level that the taxes someone pays would ideally go towards the services that they as an individual use, and that everyone needs to work in order order to be "worthy" of a social-safety-net (assuming a safety-net has to exist, which isn't a given in such points of view). It doesn't have to be that way but sadly there are motions in that direction.
Net worth taxes exist in a small number of places in Europe. It appears to be unpopular because it causes people to hide their assets and invest in assets that are harder to place a value on. Some places just have a property tax instead.
Revenue is taxed in many places; it’s called sales tax. Profit is also taxed. It is called an income tax / corporate tax.
Humans can deduct things so they are taxed at their profits. It's just that rules are not straightforward and what counts as a deductible expense is not the same for both. So you are aiming at the wrong level for a critique. See https://news.ycombinator.com/item?id=26698446
To me, it seems that discussing about corporations vs. individuals is the wrong kind of discussion to have. At the end corporations are groups of individuals, and whenever someone argues about unfairness of different treatment, there's an implicit "and that's bad because some individuals end up on a better position than others" that, I think, should be talked more explicitly.
At the end of the day, a corporation is an instrument, and its wealth is the wealth of some individuals. Corporations are instruments to coordinate wealth creation, so perhaps the issue is how/whether rich people are profiting too much from "The System" we have in place, be it through an excessive command of corporations (which are allowed certain things) or through other means. I mean, if wealth inequality among individuals were close to nil, then it would not be too polemic to raise taxes if we need more public budget, or lower them if we need to push the economy forward - the issue when taxes need to increase or decrease is where do you cut / take.
So perhaps we're focusing our analysis on optimizing the wrong thing.
Of course it would, the government is already taking taxes from employees by means of income tax. Double dipping by taking from the company means less money for the employees.
No, employee compensation is an expense to the company, the more they pay the employees, the lower the eventual profit, which is the basis upon which income tax is determined.
Still, this left over money will be available to spend in other areas like R&D, marketing, etc. The government does not have a right to 30% of it or whatever the corporate tax rate is.
No, you are repeating your mistake. Companies are free to spend on marketing or R&D, which are common expenses, thereby reducing their profit and by extension, reducing the amount upon which they are taxed.
>> The government does not have a right to 30%
Apparently it does, since governments all over the globe have been levying taxes on corporations for decades. Unless you think the Cayman Islands, Bahrain, and Isle of Man should be the model for industrial countries.
The Gulf countries don't charge corporate taxes as far as I'm aware, not just Bahrain. Also, the company might want to spend the money on R&D and marketing the following year, so having a spend it or lose it model is backward.
And, just because the rest of the world's governments are stealing does not make it ok.
Corporations enjoy signficant benefits of being in the state, including, for example, a police force that protects them from attack, and a legal system that will resolve disputes they have both internally and with others.
They should pay reasonable (not low) taxes in any event, not subject to the caveat you identify.
But this is their tax they pay on the money _they_ earned.
Not sure why this is okay for corporations to appropriate this tax as theirs.
> Everyone that gets a dividend pays tax.
In my country dividend tax has a lower rate. You have this insanity where a person making money out of their hard work pays more tax than a person living off dividends and doing nothing.
>In my country dividend tax has a lower rate. You have this insanity where a person making money out of their hard work pays more tax than a person living off dividends and doing nothing.
You have to put this into perspective, there are ways to obtain profits from capital gains without doing any work whatsoever, without employing employees at all. Dividends are quite harmless, because those people living off of dividends give people jobs who are then doing productive work. Compare that to getting rich off a stock market bubble, where literally nothing productive was done and no jobs were created.
But does your tax system allow for company tax payments to be offset against the tax liabilities of those receiving dividends? Here in Australia/NZ companies can provide shareholders with franking/imputation credits.
No, here dividends cannot be offset, but there used to be tax credits to improve the effective double taxation. However, I don't think this is a problem as the right way of getting money out of company should be a salary, not dividend.
The money used to purchase shares has already been taxed as income. A person receiving dividends is enjoying the benefit of their own hard work in the past.
That's the whole problem, the finger pointing ends in everyone pointing at eachother equally. It's why corporations can do atrocious deeds to human life or the environment and people end up with bonuses instead of handcuffs.
But imagine you are some unethical person looking to ensure as little of of your hard earned cash goes to things like a subsidized meal to a hungry person as possible. Your company is raking in millions and you want that money, but you know Uncle Sam is going to take his cut. Maybe you set your personal salary at minimum wage, and have the corporation own your nice house and nice car instead, and use the corporate card for your airfare and dining. IIRC, setting up a corporate trust similar to this was how Jeffrey Epstein was able to get Les Wexner's multimillion dollar Manhattan townhouse for nothing at all on paper. The Trump foundation also got into similar trouble for misuse of funds a few years ago. No doubt a lot of people in this world are abusing the tax advantages offered for corporations towards personal gain, and no doubt they lobby lawmakers to keep things this way.
Isn't that a consequence of "buying" liability protection by becoming a C-Corp? There are other forms of incorporation that allow for pass-through taxation. There is a reason those are only used in specific situations.
If we are going to treat corporations as a fictional person, we should only be looking at the direct corporate tax rate.
It's larger, but less effective. The G.I. bill gave resources to veterans to advance their lives while the 'rona-based payouts disproportionately affected the already-wealthy individuals and businesses due to the military-industrial-congressional complex.
It's not so much whether it's larger or smaller, but how well it was spent. Free college and the myriad other benefits in the G.I. bill helped build the US into a superpower (well combined with other fortuitous things, like being the only major industrial power that hadn't been bombed to smithereens). The bailout of large industries that a lot of the CARES act went to were not well spent: it was cronyism to prop up underprepared corporate structures (i.e. those that have hollowed out any "emergency fund" due to it being an overhead to their bottom line) and prevent bankruptcy from enabling other folks to come in and perhaps run things better.
> prevent bankruptcy from enabling other folks to come in and perhaps run things better.
Yeah, while I think the CARES act helped individuals, there's no need to try and save every business. Take restaurants for example. In good times, most restaurants fail, and new ones start. The narrative that if restaurants failed they would never come back was simply untrue.
I agree, what is going on is legalized corruption. Tax rates are too high, so no one is paying while lawmakers are getting compensated (in one form or another) for introducing and maintaining tax loopholes
But now is the best time for the tax part to change. The economy has been floated by unprecedented government pay-outs, narrowly avoiding a deep depression that would have crushed even the most cash-flush corporations. If certain people have their way, the working class will foot the bill for this for decades to come. Maybe it's time for those who thrived through this to pay their share just like in the post-WWII era where max tax rates reached 80+% up until the early 60's?