[varispeed]

> If the combined rates were much greater it would create an incentive against creating c-corps.

This argument isn't sound. If high tax doesn't create an incentive for creating corporations, then it also doesn't create an incentive for people to work and be productive. Now the taxes are pushed on the workers that have to pick up the corporations tab. It may have worked in the past where corporations had high head count and were not outsourcing, but now governments rather than working to correct that imbalance, they increase workers' taxes. We can see this system is slowly collapsing as your can tax the workers only so much before they feel like slaves and stop working.

[nullc]

I am not following your reply. Consider that you face two options for organizing your business activity-- you can operate it as a pass through entity of some kind (s-corp, sole proprietorship, etc) or you can operate it as a c-corp. The c-corp path will result in double taxation, corp tax and LTCG. But the combination of the two is a similar rate to the tax on income (e.g. 21+20% vs 37% top marginal).

Cranking the CG or corp tax rate even higher will result in more businesses with less diverse ownership, even if only on the margin, which would result in increased wealth consolidation.