[king_jester]

> Ask high-worth individuals in NYC with >$500,000/year income and a few millions to lose what their overall tax rate is.

Wouldn't we expect the tax rate for such individuals to be high? It's not like someone with that high of a pay will suffer from a 50-60% tax rate.

[beagle3]

Context: mbesto said (essentially) "well, yes, that's the theory, but in practice no one pays it because you can engineer your taxes around it". My reply was "people who have a lot to lose if they are found guilty of evasion do not actually try to engineer around it".

Or, I'll say it another way: The reason most people believe it is easy to engineer around it, is because they have not yet been audited. It's actually not at all easy to engineer around it.

Case in point: Mitt Romeny "only paid" 18% in taxes, so you might assume that's his tax rate - but it isn't; he paid 10% more to his church. Had he not done that, his tax rate would have been 28%. Also, for the privilege of being shielded from lawsuits (through corporate structures), his corporate paid some nontrivial corporate tax - 20-30%. So he actually paid ~50% for his work. I'm not defending him - I would be glad if he paid more - I'm just explaining that people are completely irrational in their discussions of tax rates. The ONLY number should be (what I take home)/(employer's out-of-pocket expense to employ me), for salaried employees.

[onetwothreefour]

Hehe. Yeah. Most people don't realise that the US has insanely high taxes for almost zero in return. Plus, double taxation on corporate profits.

Most sane countries have things like franking credits where owners only pay to top up from the corporate rate to the personal rate. You can sort of get around this in the US with a S Corp, but you're still paying something like ~50% for zero social services.

Let's not forget world wide taxation and other arcane issues in the US tax code.

Sigh... :)

[beagle3]

I disagree that corporate tax is double taxation: It is the premium you pay for limited liability. You can run things personally, thus avoiding the higher ("double") taxation, but then if you are successfully sued, you can lose everything you ever earned.

Whereas a corporate structure shields you from personal liability (theoretically, not including criminal liability - but in practice, it's quite effective for criminal liability as well).

[onetwothreefour]

I don't see how limited liability is an argument for double taxation when 9/10 Western democracies have franking credit systems that eliminate the double taxation on corporate profits paid to owners (and I'm only addressing this from a startup owner perspective, since this is HN).

The simple fact is that the US has something like this already, with qualified dividends taxed at 15% to try to reduce the burden of double taxation. That's still not low enough.

The point is moot when you start talking about S Corps since those offer the same limited liability while passing through the tax burden onto the shareholders directly.

[dantheman]

There are many different corporate structures, the sole proprietorship provides the limited liability without double taxation.

[beagle3]

According to http://www.nytimes.com/allbusiness/AB4113314_primary.html (and just about every other source google points me to) , a sole proprietor has unlimited personal liability for the obligations of the business.

What's your source for saying that it provides limited liability?