[cperciva]

Eliminating corporate taxes isn't exactly what you want: It would turn corporations into tax shelters, allowing investments to compound at a faster rate. (You'd be effectively giving everybody an unlimited Roth IRA.)

What you really want is an integrated tax system like Canada and many other countries have: Corporations pay income taxes, but when they pay out their profits as dividends, the individuals receiving those dividends pay tax on their share of the corporation's pre-tax income, but get a tax credit equal to the amount of taxes the corporation paid. (Sounds complicated? It is -- but it works.)

As a side benefit, this fixes the "Buffett pays less tax" problem, since the taxes paid on corporate taxes (in the end, once they've been paid out as dividends) are based on the same progressive system of increasing marginal rates as any other income.

[3pt14159]

It is better in Canada, but we have loop holes like the rest of them. Certain countries have tax treaties with Canada that effectively allow a massive decrease in dividend taxes provided that you have "management fees" in those countries. Although you wouldn't qualify for other benefits of being a Canadian company, such as the one time 750k tax free capital gains allowance, or SR&ED or research grants.

[cperciva]

Oh, I'm not saying that the Canadian tax system is perfect. Far from it. Just that this specific property -- integration of corporate and personal income taxes -- is a very good thing.

[3pt14159]

Definitely, in this we are in agreement.

[hugh3]

It would turn corporations into tax shelters, allowing investments to compound at a faster rate

Is that so bad? Is it bad if we encourage people to invest in businesses rather than term deposits (or CDs as I think they're called in the US)?

[cperciva]

That depends on what the businesses are doing. If people set up corporations which do nothing other than hold term deposits, I don't see how that's any better than people directly holding term deposits.