[legitster]

Someone put it best when they said "corporations may not have a heart, but they don't have a stomach either". Unlike people, corporations do not consume for the sake of consumption, instead they invest in assets. A tax on corporations is directly passed through to employees, customers, investors etc.

From what I understand, the actual proposed replacement for the corporate income tax is much simpler: eliminate it and replace it with a much more comprehensive capital gains tax. Then require companies to be much more forward with paying dividends.

[sbov]

Don't dividends get taxed at the residence of the person being paid the dividend?

The problem is that corporations use the infrastructure and resources of countries they operate in. So you would still have a situation of a multinational company using the resources of country X without necessarily paying any tax for using the resources of country X.

This is not sustainable.

[dennisgorelik]

Country can still tax usage of these resources.

For human resources: income tax on salaries, unemployment insurance, medical insurance etc.

For some materials: excise tax.

For real estate: property tax.

[jsprogrammer]

>Unlike people, corporations do not consume for the sake of consumption, instead they invest in assets.

Uh, what exactly is the difference between consuming and investing in assets? Most investment in assets is actually just a claim to consume some of the ROE.

Also, it's not clear to me how shifting cash flows into something makes an asset (or how a physical asset could directly benefit from increased cash flow [not sure how this is even possible; I can't pump FRN's into my car's gas tank]).

[bduerst]

What about the majority of companies that don't pay dividends? I agree that tax codes are complex and the international theater makes them hard to enforce, but most of the proposed replacements for corporate income tax are typically half-baked.

[phlo]

Either (as the parent comment proposes) force them to pay dividends. Or don't: in order to profit from the higher share price, investors either have to sell some of their shares (realizing their capital gains) or use them as collateral for a loan (which should be treated as a capital gains realization event).

[bduerst]

There are entire industries with thin margins (e.g. grocery, airline, blue collar services) that would be destroyed if you forced them to pay the same dividends as others.

Why are you fixating on share price? Now how are you going to tax LLC, LLP, etc.? Privately traded corps that don't have a market price?

[phlo]

As I said, forcing companies to pay dividends was the parent poster's idea. If anything like that were to be entertained, I'm sure the forced dividends would be in relation to the corporation's profit.

As for privately traded corps and partnerships: My proposal was to tax capital gains. This could be done at each realization event, and at that point your transaction will usually have a market price. If you are exchanging stock in two privately traded corps, some way to determine fair market value will have to be found, but that seems to be an edge case to me.

[bduerst]

That would be double-taxing capital gains, since individuals are already taxed on it, and would de-incentivize companies from giving corporate income to workers while incentivizing companies to hoard economic wealth. You want companies to spend money, not keep it.

Most limited liability organizations also don't have equity, which creates another loophole in your system. Now you're starting to get into why corporate income tax is complex.

[walshemj]

Companies make use of education roads and other infrastructure and in the UK not having to provide health benefits.