[FredPret]

It also takes money away from the corporation, when they should be doing one of these:

- spend their profits to try and grow, but fail; thus spreading their capital into the rest of the economy

- spend their profits to try and grow, and succeed; not only spreading capital but creating new wealth that will eventually work its way around to the shareholders

- return it to shareholders, where it gets taxed

[what]

Isn’t that how it already works? They can spend all of their profits or pay taxes on profit and sit on the rest?

[FredPret]

Depends on what it gets spent on - capital purchases dont reduce net income. You can write it off, but there are rules limiting how much.

So you could have a situation where you have $1m in profit, and you want to buy a $1m machine, but the machine goes on your balance sheet and not your income statement, so your books still show $1m in profit, even though you now have no cash. And now you still have to pay tax on the $1m.

Now, in the next year, the rules allow you to write off say $200k of that machine, reducing your profit by that much. Eventually, you get to write off much / all of the machine.

But cash is king, and on a cash basis, the tax man is doing very much better than the business in this scenario.

Better to dispense with all the accounting intrigues, tax corporations at 0%, and just tax dividends, buybacks, and salaries.