[byrneseyeview]

This indirectly brings up the point that it's hard to make the case for directly taxing corporations at all, aside from the fact that it's convenient. Ultimately, all corporations are owned by tax-paying people (or nonprofits). So why not tax their distributions as income? If I forgo working, and instead develop some skill that I could use to raise my income, nobody taxes me on the increase in notional wealth I have from being more skilled; I get taxed when I get paid in a form that I could use for consumption.

Meanwhile, corporations:

a) Get taxed on their profits

b) May pay lower notional levels, but only by paying people to game the rules

c) Get taxed on their dividends (essentially a 15% surtax on the 35% tax on their profits)

d) Also get taxed through capital gains--which is a change in the (un-inflation-adjusted) net present value of future dividends (which, remember, are taxed when they're earned, then taxed when they're paid).

If you give our tax code enough credit, the 35% tax rate is a lower bound. If the government is willing to let you pay $X less in taxes for doing Y, they're saying that the benefit of Y exceeds the forgone tax income of $X. So if I get a $5K tax credit for installing solar panels, the amount of tax-equivalent benefit the government has derived from my behavior is at least $5K.

You could argue that the tax code is imperfect, and that action Y is not always worth $X. But then you're suggesting that we transfer money from a competent rule-follower to an incompetent rule-writer. If governing skill is constant across tax collection and other government behaviors, then exploiting tax loopholes is just in proportion to how exploitable they are--a government so screwed up that it can't manage to legally tax you for anything is a government that definitely shouldn't have its hands on your money.

Obviously, the government has other core competencies besides taxation. But corporate taxes are worth reconsidering. I'd much rather have dividends taxed as regular income--turning corporations into a pure savings vehicle. Taxing corporation-generated wealth four times--when it's generated, when it's calculated, when it's distributed, and when ownership is transferred--is at least three times too many.

[notJim]

Another person suggested this idea and the thread, and this was the problem I had with it:

> Ultimately, all corporations are owned by tax-paying people (or nonprofits). So why not tax their distributions as income?

Many companies don't pay dividends and sit on their profits for a long period of time, so in practice, that money might never be taxed.

[byrneseyeview]

But if the money is never distributed, how does it benefit the shareholders? My thought experiment from earlier in the thread: what is the net present value of a billion dollars in cash, if I put it on a rocket and launch it into space? If you can't get the money, you can't spend the money, and you can't enjoy the money.

You could theoretically borrow against those assets, but only if your lender expected you to be paid. That's the beauty of the plan: it means that the only taxable event is the one that materially benefits you.

[joesb]

Owner of the share/company is going to want to use that profits before they die, so the transfer of money from company to individual will happen one day.

[notJim]

But certainly not all of it. As another commenter upthread put it, I might have a company that makes $5 billion/year and a $100 million/year lifestyle. I will never spend all of that money.