I mean, I am not an economist, I have no idea if that would work or not(probably not)
So Amazon would own the entire supply chain: Manufacturing widgets, selling widgets, storing widgets, shipping widgets, handling returns, etc. They already sort of do this, but if you add a 20% tax at each hop they would eliminate the remaining hops as fast as they possibly can or buy the hops.
And you could never start a small business, because everyone who'd want to buy from you would save a ton of money doing it themselves. By not taxing business transactions, it's zero additional cost to have someone else do something for you, so it makes it possible to grow a small business.
In particular, grocery stores with a 2% margin would be hit hard.
By having a flat tax it doesn't make sense to shift 'money in' under different categories because all gets taxed the same rate.
So for example, income, capital gains, dividends would all be taxed at 10% or 15% or whatever.
You can already do this today. Eventually you will need to sell and pay the taxes, eg. if interest rates rise and it's no longer worth it or when you die and have to pay the loans off.
> Or, you could leave it all in a company that you own, draw no income and have the company pay for your housing, meals, travel, etc.
If your company pays for your personal expenses like housing, it's taxable as income. Lots of SV companies pay for their interns' housing and the rent was always listed on their W2's.
Sure, but it can be a strategy to reduce taxable income. My point is that people at the top end are highly incentivized to avoid taxes and will find ways to do so. I'm not making any policy prescription, tax policy is hard and I don't claim to know what's optimal or even necessarily better.
Obviously this is a terribly contrived example, but it is somewhat descriptive of the type of strategy used to reduce taxable income. Things are obviously more complicated when you have numerous types of income from domestic and foreign sources.
Keeping it in the company would then be irrelevant (the more you keep in the company by not paying yourself a salary, the higher the corporate taxes).
I also don't think you could easily manage raising the effective corporate tax rate very much without seeing further offshoring of profits, which is the present situation. We presently live in a world where capital movement has been liberalized and the movement of people(Schengen notwithstanding) has not. So even if you have some sort of profit/income agnostic flat tax, any business that can seek lower tax rates abroad will.