[adeptus]

I am still confused as to why companies have to pay tax at all? If every single employee including owners already pay income tax, and IVA/GST/purchase taxes, property taxes, xyz additional personal taxes levied by respective governments, why then on top of all that make companies pay tax, doesn't that just detract from people wanting to start companies and/or seek countries with the least taxes/best loopholes?

Disclaimer: I own no companies. I don't even own stocks at the moment.

[lm28469]

> I am still confused as to why companies have to pay tax at all?

Because that's how we decided to build our societies. Money flows up very easily but doesn't flow down anywhere as fast, that's why we tax companies and people.

The sole purpose of a company is to make as much money as possible. Laws are there to make sure they do it safely (ie. don't send 12 years old kids to the mine, don't make employees work 7 days a week), make sure the system isn't abused (Amazon trucks use public infrastructures to deliver goods, why shouldn't they participate to the maintenance of said infrastructures ? &c.), and make sure the country benefits of having such companies operating within their borders.

Not sure about other countries but in France taxes are used to finance schools, universities, hospitals, justice courts, reduce the cost of doctor visits, train tickets, housing assistance, allowance for disabled people, active solidarity income, public education and a lot of other things.

I could find endless arguments to support why companies _should_ pay taxes but none to support the opposite, besides "I own a company and want to accumulate more money"

[asdfadsfgfdda]

How's this for an argument against corporate taxation: Corporations receive money from customers, and distribute to employees (salaries) and investors. It's just simple arithmetic. How does a tax on corporations impact these three stakeholders? It seems unlikely the burden falls entirely on investors. So should we burden these customers and employees with taxes? If the real goal is to tax the rich, why not tax investors? Also, corporations have shown they are most capable of avoiding taxation. How efficient is a tax on corporations when they can easily hire an army of tax lawyers and accountants? Would the world be a better place if those tax lawyers were doing something more productive?

[Daishiman]

The goal isn't to tax the rich, it's to internalize the costs of running a functioning society where those corporations and its members can actually exist.

[Icedcool]

Because they act as a stand alone entity, and they may make and keep profit that doesn’t get dispersed to the employees.

[anonunivgrad]

A company doesn’t “keep” anything. It eventually uses all of its money to either pay dividends (or stock buybacks, their financial equivalent), salaries, business expenses.

We tax corporate profits, not income. That takes out of the dividend stream, so we tax capital gains (the tax the investors pay on dividends/stock appreciation) correspondingly lower.

You could in theory get rid of the corporate tax and just tax capital gains at the same rate as income. It would fix a lot of problems. But you would upset a lot of people who don’t understand finance and taxation, like the people seeing red in this thread, who have some moral gripe with these corporations (who are mostly just doing what the law incentivized them to).

It would have one small effect though. Since the US taxes the worldwide income of its citizens and permanent residents, it would probably overtax them, making them pay the higher capital gains rate for profits made in countries that do retain the corporate tax. The most obvious ways to fix that would just reintroduce the problem of sorting out where the profit was “made”, which is where we are now. Ideally, you’d get all of the western countries to sign up to end this stupid corporate tax at the same time. That’s difficult because a few important countries have used low corporate tax rates as a way to attract business that would otherwise have no reason to be there.

[beagle3]

The problem you do not address, which is already big and would become huge if corporate tax is abolished, is the deferral aspect:

All companies will hoard all cash waiting (perhaps decades) until the tax rates are lower, and then pay it out as salaries/dividends with a lower rate; it’s already happening with overseas profit and “tax holiday” years, but so far only Apple/Google size companies can participate.

Once you enable this for domestic companies, every employee making >$80K will incorporate, keep money in company and draw minimal salary actually needed for everyday life, waiting for favorable tax day or needing the money. The tax base would be reduced by 10-50% if not more (due to progressive taxation) and though it may even out in the end, it would make tax receipts unpredictable and likely somewhat lower overall.

I don’t see the issue with corporate taxation - it’s a liability shield, and it has a cost. Those who don’t like it can do a tax pass-through and risk the liability. Almost no one wants to do that.

[PragmaticPulp]

> A company doesn’t “keep” anything. It eventually uses all of its money to either pay dividends (or stock buybacks, their financial equivalent), salaries, business expenses.

Companies certainly do keep cash balances. That cash balance directly adds to the company’s valuation. They’re not obligated to pay it out or spend it. The owners of the company can sell the company, including cash balance, as an asset.

Suggesting that a company’s cash balance somehow doesn’t count because it’s inside a company structure is disingenuous.

[anonunivgrad]

>The owners of the company can sell the company, including cash balance, as an asset.

And just what do you think a cash balance does to the sale price of a company? Btw, that sale is a capital gain.

[emteycz]

They don't make use of it in a way a person does. They use it to make more income, not for food, housing, fun, etc.

[TheRealSteel]

That sounds like more of a reason to tax them, not less.

[anonunivgrad]

You’re just quibbling about how much the total taxation should be. The point is that it doesn’t matter if you tax the company profits at 20% and capital gains at 20% (assume the normal income tax is 40%) or if you tax the company 0% and tax capital gains at 40%.

The government already tries to reduce double taxation. There is not supposed to be a penalty for incorporating vs. doing business as a sole proprietor or general partnership. That’s why the capital gains tax is lower than the income tax.

This is all about ease of administration and making creative accounting more difficult or impossible. If you’re looking at it through some moral lens, you don’t get it.

[PeterisP]

It does matter if you tax the company profits at 20% and capital gains at 20% (assume the normal income tax is 40%) or if you tax the company 0% and tax capital gains at 40% - because there's a substantial timing difference. You have to pay the corporate income tax this year; you can generally defer the capital gains tax for arbitrary amount of time with some structuring to avoid any taxable event; there's some overhead involved so it's not for small amounts of capital gain, and you need control over the corporate structure, you can't do it for capital gains on 0.001% or Apple; however, if you'd have 0% tax on company profits and capital gains at 40%, then all the billionaires would be paying essentially zero taxes.

[emteycz]

No, it doesn't. It's a reason to not tax them. We try to tax consumption, not production in the modern world. Plus what the other commenter said.

[linuxftw]

In the US, some companies do not pay tax, the shareholders pay the tax on any income (S Corporations). Sole proprietors and partnerships are the same. C Corporations are like a legally distinct 'person', and what they pay in salaries, etc, are deductions.

It is 100% possible for a C corporation to pay no tax because it pays out all profits (income minus deductions) or operates at a loss.

Many large firms are hiring contractors to perform 'capex' work that qualifies for R&D Tax credits: https://www.cpajournal.com/2017/10/30/u-s-research-developme...

Tax laws drive some crazy incentives.

[realityking]

Take the case of me, a German citizen living in Germany, owning Apple stock. The German government taxes me on the capital gains - fair enough.

But with your model the US government and the government of California would receive no taxes beyond those owed by the employees.

[andromeduck]

I don't see a problem with that if the value is taxed where it is created, eg via VAT.

[newhacker2719]

US taxes us on capital gains. OP is asking why the same money is taxed twice. You have simply restated the scenario what OP is asking about. The question is why are corporations taxed , not, what would happen if corporations are not taxed.

[warent]

You seem to be talking past the parent comment. Their point is that a foreigner can make capital gains on an American company without America getting tax money. Double taxation patches that up.

[emteycz]

And why is it wrong? Either they sell and/or operate in the US - so US sales tax is paid and their US employees/owners pay their tax - or they do not, no reason to pay tax there.

[ntsplnkv2]

The US doesn't have sales tax at the federal level.

[wil421]

Just to add sales tax is a State/County/Municipal thing. I just voted on a 1% sales tax increase for my county, for infrastructure, cyber security, and other public stuff.

[emteycz]

That's something that could be easily changed.

[ntsplnkv2]

It doesn't seem like anything could be easily changed at the federal level, especially something as unpopular as a tax hike.

[raxxorrax]

Theoretically, if salaries were proportional to profit and therefore the overall tax burden, it would make less sense on a domestic level, I agree.

Similar to VAT you could argue that you pay with money that got already taxed.

But if companies have rights, you can argue that they also have burdens.

[crazypython]

Because a company is allowed to go in debt or bankrupt independently of its shareholders. If your LLC is in debt and defaults on that debt, the owners (you) won't go in debt.

There are better explanations, including that a corporation is a beast of the state etc.

[stjohnswarts]

Why in the world do you think a company shouldn't pay for taxes on profit? If that were true everyone would just incorporate and no one would have to pay taxes.

[caffeine]

Not true. Whenever those companies want to somehow give those profits to a human, that is taxed (income tax, dividend tax, etc.). So requiring no corporate tax would not mean that no taxes are paid.

[thehappypm]

It’s just a weird way to tax. People don’t pay taxes on “profit” (their savings) they pay taxes on “revenue” (income). Corporations and people are different and it’s fair to ask the question why a non-person entity has to pay that sort of tax.

[0goel0]

Empirically, no it does not.

It causes companies to seek loopholes, yes. They'll incorporate in Ireland for example, but they'll continue to operate wherever they need to.

[JoeAltmaier]

Because we'd all become companies, and nobody would pay taxes.