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Comment by seibelj | Hacker News Reader

IMO the corporate tax rate should be zero, and then everyone would be on the same playing field. Right now the only companies that pay taxes are small ones without the resources and staff to get around it. With 0% corporate tax, all of these games and shenanigans would end.

Also, corporate profits are double-taxed anyway, as taxes are paid once on profits then again as dividends / capital gains by the shareholders. This is one reason stock buybacks are so popular - way to benefit shareholders without the ridiculous double taxes.

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"Corporations are dodging taxes lets just throw in the towel and not attempt to do that at all."

Also capital gains aren't double taxing corporate profits the benefits are going to two completely different groups of people.

Who does corporate income benefit if not shareholders and employees?

The corporation can deduct the wages it pays employees, which is why they’re fully taxed at the individual earned-income level—this is the personal income tax. In theory, the corporate tax takes a cut of profits (i.e. what is due to the shareholders), so the capital gains tax is lower to make up for it. The problem is that the corporate tax is too easy to legally avoid for large sophisticated corporations, an almost impossible problem to solve within the international system. The solution is to just abolish it and tax capital gains at the same rate as earned-income.

Zero corporate tax would lead to a lot of avoidance and drops in government revenue. Say you are a consultant earning 100k a year who owns a house. You could just pay the 100k to your company and borrow against the house for living costs and pay zero tax for the time being.

Right but eventually they money has to get from the company to the consultant - either dividends or wages. Either way it'll be taxed.

Yep. Eventually. Meanwhile Buffett's tax rate on his (and his companies) income is within the distance of epsilon from zero. Can you estimate when Buffett is going to need the bulk of the money from his compankes to buy a new house? How long heis going to have approximately zero tax rate, that is? My personal estimate is with a very good approximation 'never'.

As long as berkshire hathaway is paying capital gains on every investment, why would you care if the money stays invested in the company?

Buffet pays capital gains taxes and most economists who argue for dropping the corporate income tax only recommend so with an increase in income/cap gains taxes or even merging them.

Yeah maybe eventually. Though people try to find loopholes eg. move abroad, transfer the money offshore, lend the money to the consultant from the company rather than paying him or her, send the money to a company owned by an opaque offshore trust and so on. Big industries spring up to facilitate the avoidance that lobby politicians to allow the loopholes and so on. It can get kind of messy.

Literally everything you mentioned isn't a loophole, it's tax fraud. Tax loopholes are what they do within a single jurisdiction to avoid taxes. What you're suggesting is transferring money from one jurisdiction to another, which can't be done tax-free.

On example under UK law is if you work abroad for a year and deemed non UK tax resident then you could receive income tax free during that period. The K2 scheme that Jimmy Carr took part in got a lot of coverage https://en.wikipedia.org/wiki/K2_(tax_scheme)

Only if they needed the cash, or else the corporation would be a vehicle to store wealth.

You could do this now, leave your profits in the corporation and borrow against the balance. I don't think it would work though, compound interest accumulating on the loan would soon eat the gains.

So don't let the interest accumulate. Taxes on the income needed to cover the interest wouldn't be all that high compared to taxes on the full amount of the loan. Or the loan can just be interest-free, but then you pay tax on the foregone interest as if it were income.

> Zero corporate tax would lead to a lot of avoidance and drops in government revenue. Say you are a consultant earning 100k a year who owns a house. You could just pay the 100k to your company and borrow against the house for living costs and pay zero tax for the time being.

The issue is that you can already do this by using a corporation incorporated in a jurisdiction with no (or lower) corporate income tax -- which is what international companies and billionaires do and it gives them an unfair advantage, so we should level the playing field.

Meanwhile notice what you're really doing -- you pay no income tax only because you have no income. But that only works as long as you never want to spend the money. Which works great for Apple, because they don't have anything to spend the money on anyway, but they're already doing that.

The consultant making $100K is going to have to choose between spending the money (and so paying the tax on it) or taking a vow of poverty, because you have no equity to borrow against if it wasn't already at some point taxable income, and once you've spent that you still want to eat.

> Which works great for Apple, because they don't have anything to spend the money on anyway

Not true. Apple spends boatloads of money on dividends and share repurchases. Apple doesn't pay taxes on that, but shareholders do.

As an employee, you would pay taxes on the benefit of getting a free house from your company.

How will you pay back the loan without income? Company you will pay you income that is taxed.

Eventually the company sells the house and pays taxes.

It might defer taxes, but won’t avoid them.

This seems like the obvious solution, make up the difference by taxing dividends and capital gains as if they were income. I'm pretty sure this is where we will end up anyway, there seems to be a race to the bottom.

It's much harder to move your family offshore to avoid tax than it is to move your profits offshore.

This is how capital gains and dividends used to be taxed...

The capital gains preference is a relatively recent development in the tax world.

Capital gains is weird because there are several different ways to justify the lower rate, but then how it's calculated should differ.

For example, if you bought a lump of silver thirty years ago and sell it today, the nominal price is higher, but that's basically just a result of inflation. Shouldn't we be taxing the real gain and not the inflation? But in that case maybe instead of a lower capital gains rate we should only adjust the gains for inflation and then apply the normal rate.

Then you have the double taxation argument, but in that case you should either just get rid of the double taxation or dividends should be treated the same way.

And there are several others, but what they all amount to is that the lower rate is a bad hack and we would be better off in each case to account for the thing that needs adjusting directly instead.

I agree that corporate taxes aren't strictly required. They are useful though, if you think about international capital markets. Without corporate taxes, foreign investors could extract all profits from a company, without paying any income tax in its country of residence. You are right about double taxation, but you can think of corporate tax as a part of income tax that is guaranteed to benefit the country where the company is registered.

I don't want my fire engines used to protect someone's property who isn't paying to support them.

I'm not sure if you are being sarcastic or not, but somebody owns that property and is paying income or capital gains on any realized profit.

And is probably paying property taxes which are the specific tax paying for the fire engine in a lot of US jurisdictions.

>Without corporate taxes, foreign investors could extract all profits from a company, without paying any income tax in its country of residence.

Howso? You still have income tax and capital gains tax.

which is zero if you re resident in some interesting countries.

A man after my own heart. I've long been saying that corporate tax rates should be zero, but all dividend and capital gains rates should be taxed at regular earned income rates. What we have now is this weird system where income earned through investments is taxed twice (first corporate, then dividend or cap gain) but each at a lower rate. Just normalize everything.

Giant concentrations of not reinvested money are destabilising. Especially if companies are also allowed to run political campaigns. Arguably retained profits taxation should be higher than shareholder payout taxation to encourage either reinvestment or return to shareholders.

(Note that large categories of shareholders are in pensions or other tax-sheltered vehicles that don't pay capital gains!)

Agreed with the need to have a uniform corporate tax, but not 0 - it must be higher than personal tax, otherwise you just create a new loophole.

I'd say either 20% or profit or 2% of turnover, whichever is higher. Before dividends and stock buybacks.

The corporations need to sustain the social infrastructure that made them possible in the first place.

The problem with “it needs to be uniform and higher than 0” is that another sovereign country would have great incentive to set their tax rate at a fraction of yours. Income would then flow towards being recognized in that country.

You might call them a “defector”. Others might say “well, they’re sovereign and what does that mean if not determining how to set their national tax policies?”

Is a company that doesn't pay taxes actually useful?

I would have thought it would out-compete companies that actually do pay taxes, so it would reduce revenue (presumably) without increasing job numbers.

It seems extremely strange to me to think that the primary purpose of a company would be to pay income taxes to a country (as seems to be implied by the question of whether they’re useful if they don’t).

A company that doesn’t pay income taxes can still provide useful services to consumers, provide employment and purpose for workers, and those workers will pay income tax and employer will pay payroll taxes.

I guess I'm thinking that the primary purpose of a company is to make money - and the primary way in which this leads to social utility is through taxes.

Obviously, some companies provide useful and socially beneficial services, but many (most?) do not, or even provide socially destructive services (e.g. tobacco industry). Even in the case where they do provide social utility through their products, it strikes me that a company that doesn't pay income taxes is essentially taking away customers from one that does, and so, all of the usefulness is kind of amortized.

I guess the limitation here is that companies are not all fungible - if TSMC didn't want to pay taxes, you couldn't just replace them with another semiconductor company - they do sometimes bring unique utility to the table. But on balance, I think TSMC is a unusual case, and even there, the expertise and utility is almost entirely in the skilled workers and machinery, which would survive the company's dissolution (be picked up by competitors, etc).

Competition tends to lower costs for consumers and profits for companies. Lowered profits results in lower corporate income tax.

Shall we restrict competition, in order to maximize corporate income taxes paid?

I’m not opposed to corporate income taxes or making an “is theft” argument, but I don’t see maximizing corporate income tax paid to be a first-principles good outcome to seek.

That's a good point. I was more thinking in response to the conventional idea that there is a 'race to the bottom' when it comes to corporate taxes - which rests on the idea that a corporation operating in a given country is inherently good, no matter whether they pay taxes or not.

In general, though, I would argue simply that regardless of the specific tax revenue figures, if a company doesn't pay taxes, they get free access to a lot of services other people have to pay for. That is in essence a subsidy. There's no compelling reason why the public should subsidize a private concern.

This goes double for a competitive marketplace, where companies that aren't subsidized in this way will suffer (and have suffered - try competing with amazon on price while paying taxes!)

> I guess I'm thinking that the primary purpose of a company is to make money - and the primary way in which this leads to social utility is through taxes.

The social utility of making money lies in the fact that in order to persuade people to give you money you have to satisfy their wants and needs. Taxation has nothing to do with it.

The social utility of taxation lies entirely in the proposition that the government can better decide how that money should be spent than the people that earned it. It is unclear that this "utility" is actually positive when considering the system as a whole. (The proceeds of theft obviously benefit the thief, but when you consider the cost to the victim as well it turns out to be a net loss.)

>you have to satisfy their wants and needs

I don't think this is true at all, even if we accept that all wants and needs are good ones (opiods, for instance). I pay a substantial portion of my income in rent. That's not because my landlord is satisfying my wants or needs. Far from it. Actually, he's the most miserable, difficult person I regularly have to deal with. However, because land is a natural monopoly, I have to suck it up. There are many, many companies that work like this.

The social utility of taxation is simply that in a democracy, the people can decide what they need. Notable achievements of this system include stuff like courts, roads, and (in some countries) efficient, affordable healthcare.

> I pay a substantial portion of my income in rent. That's not because my landlord is satisfying my wants or needs.

If you don't need or want shelter then why are you paying the rent? Clearly the landlord is providing something of value to you.

> The social utility of taxation is simply that in a democracy, the people can decide what they need.

Nonsense. People can decide what they need perfectly well in the absence of taxation. It isn't a prerequisite for fair arbitration, travel, or health care either—all of these things have at one point or another been provided without any government involvement whatsoever.

I guess we're in ideology territory here. You know as well as I do that the word 'rent' does not refer to an exchange of services, but rather comes from money you extract through ownership of a thing - no matter the provenance.

People wouldn't mind free market radicalism so much if they were restricted to just those things in which a free market is possible. Otherwise, you can enjoy deciding which broadband provider you're going to choose, when there's only one set of cables serving your region - or any of the other great 'decisions' you can make when confronted with monopoly.

Or, you can nationalize, and give monopolies to an organization precisely designed to manage monopolies (primarily the monopoly on violence) in a way that's more or less livable.

We're straying away from the point here, though. I think it's obviously possible for companies to exist that serve no good whatsoever. Companies exist to make money. Unless there's an apriori link between some people making money and universal good that I'm unaware of, there's no way you can step around that. Therefore, making taxes zero will always be an unfair deal for some people - since there will be some companies that contribute nothing, and yet use resources and services provided by the government.

Obviously, you could have a mad-max style anarcho-capitalist system, or something, then all my concerns would be void, but probably soon, all your concerns would be too - and all of your neighbors, except that guy Benno, with the gun collection.

> Unless there's an apriori link between some people making money and universal good that I'm unaware of, there's no way you can step around that.

The issue here is that there is no such thing as an objective "universal good"; that's just code for "things of which I happen to approve". The closest analogue which actually does objectively exist is "actions agreed to by all participants which do not actively harm anyone else". Granting the participants the barest courtesy that they are in the best position to know their own concerns, such actions can be considered at worst neutral and in general a net-positive on the basis that the action would not occur if anyone affected by it did not see it a priori as being in their own best interest. Others may not perceive the action as "good", but as these others are by definition not impacted and thus have no standing in the matter, their opinion is irrelevant. Participants may be wrong about whether the action will benefit them, of course, and you are welcome to attempt to persuade them to your view if you feel their judgement is in error, but right or wrong this is ultimately their decision to make, not yours.

Obviously actions which harm non-participants should be out of bounds—that's something the anarcho-capitalists (a.k.a. libertarians), minarchists, and most others can agree on in principle, though for some reason only the anarcho-capitalists are consistent in applying the same rules to governments. With that caveat, however: companies exist to make money, and they do so by engaging in voluntary trades that each participant expects to benefit from. These trade are thus both individually and collectively a net benefit to the participants and either neutral or beneficial to everyone else, according to the only objective measure available.

If your happiness depends on others doing only those things which you consider "good", and not what they collectively see as their own self-interest, then I'm sorry but I really don't know how to help you. This is harm you cause to yourself and not any result of others' actions.

>there is no such thing as an objective "universal good"

I guess here is where we part ways. I can understand it in the sense of objective morality not existing, but I don't think it makes sense to say there isn't a common good. I don't know what the word good means if it doesn't refer to something that happens between people.

I think it's a basic function of groups that they establish what is and isn't good - that forms customs, then law. Obviously, this is a flawed process, but I don't think it makes sense to go total nihilist about it, and just say because you can't prove positive and negative outcomes about given actions, you shouldn't try.

We're fully capable as a society of discussing outcomes of various actions and laws - and that's what we've been doing since the beginning of time. You're doing it yourself when you say 'actions that harm non-participants should be out of bounds'. You're just drawing arbitrary boundaries around the few rules anarcho-capitalists consider sacrosanct[1] and saying that these are obvious, while others are matters of personal opinion that are indeterminate.

I think the idea of 'voluntary trades' is also a bit strange. All trades have side-effects, and most trades are with an element of coercion, natural or otherwise - people need food and shelter, they can't simply not trade for them. So even if you freely trade to build a dogfood factory next to my house, I'm implicitly part of that trade, because I live next door (or if you push the argument along, we're all implicitly involved in basically every trade, because we live on the same planet - e.g. global warming).

[1] - by the by, but I'm pretty sure these rules wouldn't be enough. If you look at early modern history, you can see that a lot of state formation was driven by the needs of capitalism - as states respond to one crisis after another.

You can't tax revenue when the business is losing money. No country in the world does that for a reason.

corporations benifit from state funded systems, so they should give back to the state. The state funds the streets they drive on, the internet they use computers first created by the government, they use are defended by copyright LAW that the government made to protect companies from copycats, they use money regulated by the government, they use employees that were educated (mostly) by the governemnt, smaller companies benifit from antitrust laws set by the government, corporations benifit from a standardized mail system run by the government, they use a regulated traffic system run by the government, they benifit from a police department run by the government, and so so much more. all these things are run by the government and funded by taxes. it's only fair that they pay their taxes and we need to crack down on tax evasion.

> we need to crack down on tax evasion

Corporations, small businesses, private citizens all benefit from state funded systems. That's part of the point of having a state in the first place.

It could be seen as hyperbolic to conflate paying the minimum legal amounts with tax evasion. Corporations pay payroll taxes, VAT in relevant countries, capital gains, etc. as required by law.

Whether our laws have large wiggle-room is another matter, but they are not evading taxes. People go to jail for tax evasion.

They go to jail, unless they're rich (and haven't committed non-white-collar crimes).

For example: https://www.cbc.ca/news/business/canada-revenue-kpmg-secret-...

>as required by law

Until they lobby/'donate' for laws (and enforcement) to be relaxed. Which continues to very very effective. So effective that campaign-finance-reform is still outside of all public discussion.

corporations can always find loopholes to siphon money to shareholders , that's the core issue. Corporations shouldn't exist - ultimately profits and liabilities should be shared personally by each individual investor.

The 'double-taxed' argument is so lame. Money circulates in a system and gets taxed basically infinitely. Worker gets paid and pays income taxes and retirement taxes. Worker spends their pay, and has to pay sales taxes. Business gets revenue from that purchase, and has to pays taxes. Business gives it to employee as salary. Taxes. Employee spends it. Taxes. Taxes. Taxes. There is no such thing as 'double-taxation'.

It boggles my mind that people try to defend tax evasion by insisting that a dollar can only be taxed once... and then never again as it is used?

People always look at it differently once it's their money being taken away. Anyone who thinks running a business is easy or more profitable than it should be should try to run one.

If running a business wasn't profitable no one would do it. Simple as that. Running a for-profit is not altruistic. It's not a service. You're not serving your community. It doesn't make you inherently good. People run businesses to make money. Full stop.

Some nonsense comparison like "harder than it should be" doesn't mean anything, it's an opinion-based weasel phrase with no definition.

Considering how dramatically wealth and income inequality has exploded over the past 2 generations in America, the only priciplied, data-based perspective is that corporations and the astronomically tiny number of people who control them have gotten fabulously more wealthy at the direct expense of workers who are working longer hours, more productively, doing more jobs, for less real money and wealth.

You can spin it however you want, but corporations and the capitalist class are more wealthy now that at any time in our history except the Gilded Era, and the working class is poorer now that they have been in many generations, and tax policy is really the only tool the people have to try and right this listing ship before another Wealth Destruction Event, another Great Reset.

I cannot disagree with this analysis any harder. It is so fully incorrect my eyes are bleeding. Although the entire paragraph was riddled with falsehoods and misconceptions, I will just say that the biggest investors and gainers from corporate success are pension funds and sovereign wealth that benefit average people through their retirements.

After reading Thomas Piketty's Capital in the 21st Century and his literal hundreds of pages of hard sourcing of the claims I made regarding wealth and income inequality and how corporations have served to massively concentrate income and wealth into the hands of a tiny class of managers, I have become used to folks like you who react extremely emotionally and inappropriately to the cold hard reality of how capitalist economies work.

P.S. in America, the retirement system is failing, from social security to public and private pensions. All of them are either being redone to ensure folks won't get their money when they retire they way they were promised, or they're just monetizing debt to keep up. Perhaps European style systems are better funded (which would likely correlate with dramatically higher taxes) but massive pension protests in France starting today would seem to suggest otherwise).

> People always look at it differently once it's their money being taken away.

Yeah, they tend to take on a more selfish attitude. People will also believe all kinds of dumb or awful things if they think it justifies their self-interest (hence the cliched quote I won't repeat).

That's why I think moderation rather than ideological purity is probably the way to go.

> Anyone who thinks running a business is easy or more profitable than it should be should try to run one.

Making ends meet isn't easy for a lot of people, either. For them, their hard work doesn't have as much of an upside at your hard working business owner.

You're right, the current taxation systems are already very complex. Governments have done a very good job at obfuscating the tax burden. Sales taxes (VAT), income taxes, and payroll taxes are all largely the same thing - they are all essentially dependent on your income to some degree. If we added all of them together into one income tax (or sales tax) then people would probably find high taxation a bigger issue, but because people encounter these taxes one by one the problem doesn't seem as big. Although, I will say that this issue is much less of a problem in the US, where the tax burden is lower than in Europe.

Double tax can be an issue but there are ways around it. In UK you used to get a tax credit on money paid out as dividends for the corporate tax already paid so if the company paid 20% tax on a profit, paid it as a dividend and your personal rate was 30% you'd just pay the extra 10%. Of course they've now complicated the whole thing up with extra rules and loopholes as politicians tend to do.

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