[ThrustVectoring]

The problem is that the money only goes to actual people eventually, not when it is earned. A beneficial owner can simply sit on their share of the company as it earns profits and becomes more valuable, and incur capital gains taxes if and when they sell. They can defer these taxes indefinitely - if they need cash, they can simply use the stock as collateral for a loan in lieu of realizing capital gains taxes. And when they die, the cost basis gets reset, wiping out whatever taxes have been deferred (and replacing them with estate taxes, if those haven't also been optimized away).

[AnthonyMouse]

> A beneficial owner can simply sit on their share of the company as it earns profits and becomes more valuable, and incur capital gains taxes if and when they sell.

That's half the problem with income taxes. They provide an incentive for the rich to never sell their investments because if they sell they have to pay tax, meanwhile they give the working class less incentive to invest rather than consume because they do have to pay the tax on their earned income immediately even if they invest it rather than spending it.

So you get bigger corporations (the rich can't sell to invest in a startup without paying tax), more incentive for international tax avoidance/arbitrage to the detriment of smaller businesses who can't do that, and more wealth inequality.

> They can defer these taxes indefinitely - if they need cash, they can simply use the stock as collateral for a loan in lieu of realizing capital gains taxes.

Because we're not using consumption taxes. You can't avoid VAT by taking out a loan.

> And when they die, the cost basis gets reset, wiping out whatever taxes have been deferred (and replacing them with estate taxes, if those haven't also been optimized away).

Again solved by consumption taxes, because there is nothing to reset if the money is taxed when spent rather than earned.

[HansLandaa]

But the corporation's income is taxed so they cannot just sit on their share of the company. Then they will pay capital gains taxes

[mbrumlow]

But the gains made by the lender are taxed, so in a way even taking a lone out you are still being taxed. Loans are not free.

[ThrustVectoring]

If you itemize your taxes, investment interest expenses (such as margin loans) are deductible against your net taxable investment income, with carry forward of unused amounts. So it nets out to zero.

[mbrumlow]

Margin loans don't give you cash to go buy a car or house, or pay for a fancy vacation. If somebody figured out how to do this they probably are breaking the law. There are also a lot of limitations to how much can be detected in this manner.

So back to the point, at some point, you are going to want to convert your wealth into actual cash to spend. When this happens taxes are levied. Yes at different rates.

Loans backed by your assets do come at lower interest rates, because of less risk, but the interest as profit on the bank is taxed as income -- for the bank.

Also, on the title "U.S. businesses contribute the smallest share of federal taxes" while may fair, looks interesting next to "U.S. businesses pay us nearly all of their paycheck".

I think it would be more simple of businesses had 100% the tax burden, but I don't think it would translate into any of us taking home more cash. All that would happen is wages would lower and businesses would pay the tax.

[leetcrew]

unless you have income (which is taxed as such) how do you pay back the loan without eventually selling assets and paying capital gains?

[ThrustVectoring]

If the rate of growth of your assets exceeds your rate of spending by enough to handle volatility, then later on you have significantly more assets to borrow against. As long as the net value of the position grows fast enough, you can kick this can down the road indefinitely. The loan gets paid back after you die, when you no longer owe capital gains taxes on the proceeds.