Comment by nonameiguess | Hacker News Reader

Comment by nonameiguess | Hacker News Reader

We need a global maximum, of 0%.

I don't want to sound like some kind of hardcore Austrian fundamentalist, because I'm not. Taxes are fine, but levying them on fictitious non-person entities is just a means of obscuring to voters where the tax burden ultimately lies. All taxes are paid by individuals, either directly, or by corporations raising or lowering the prices they charge and prices they pay, to suppliers, employees, owners, and customers. But this just means who bears the burden is now an opaque function of relative bargaining power and price elasticity of supply and demand.

But that is not what we want from tax rates. We want them to be an open, transparent reflection of democratically passed laws. To that end, it is far better to levy taxes directly on suppliers, employees, owners, and customers of businesses, rather than on the businesses. This would also have the nice side effect of causing businesses to choose where they locate headquarters and factories based on something other than comparative tax rates, reducing an avenue of both dead weight loss and potential corruption.

I'm kind of the opposite. We should have 0% personal income tax and a minimum corporate income tax.

A personal income tax incentivises the state to surveil the economic activity of individuals and play games with nudging people to do X or Y, and puts the burden of tax filing and the consequences of not reporting (which some people just can't do correctly).

Contrariwise, a corporate income tax can be thought of as a "user fee" for the privilege of the corporate veil and limited liability. If you don't want your mom and pop shop to pay corporate income tax, simple: don't incorporate, and be responsible for your personally responsible for your employees' well being. And thus it becomes a driver of small business growth and a progressive taxation (the beneficiaries of bigcorp profits are going to be disproportionately wealthy). If you can't afford an accountant to keep track of what taxes you owe, don't incorporate. Etc.

Your proposal would actually punish mom and pop stores in aggregate. Limited liability is incredibly important to business operation.

Those operations can choose to pay income taxes. A lot of small operations (contracting shops whose customers are businesses) will do just fine without limited liability. You can also limit liability on a contract by contract basis. Many people are incorporating their operations just to be able to claim business expense deductions on their income stream. This seems unnecessary.

I don't understand how this would work. You would tax corporations based on actual income? So money-losing businesses would have to pay taxes on their income even though they operated at a net loss? And low-volume/high-revenue businesses would pay less in taxes than high-volume/low-revenue would?

I am agnostic on if it should be based off of income or profit and leave those sorts of details up to congress.

> leave those sorts of details up to congress.

Yep, let's leave it to the "experts".

Policy "details" tend to have drastic unforeseen consequences, and our congress-critters tend to defer responsibility of those details to lobbyists.

We the Constituents\People\Voters have a responsibility to do our own thorough research and not allow Congress to figure out the details.

Precision matters and details can make all the difference between a good policy and a destructive policy.

How can one possibly do this? The amount of regulations/laws produced is so enormous, it is impossible to keep up.

The good news is that in my plan, you don't have to care. Unless you are the cfo of a company, or an accountant.

One of the problems is that net loss is fictional. Companies use well meaning tax credits and deductions to offset income. His point is fair but the specifics need a little tweaking.

Corporations don't generate enough profit to float a nation's tax needs.

Corporate profit in the US is generally somewhere around $2 trillion per quarter when times are very good. That's including all businesses, from mom & pop to Microsoft, and that includes all profit from global operations (not just domestic operations).

A 50% tax would only pay for just over half the US tax revenue needs (assuming you make the mistake of taxing global profits at 50% as well) and that would probably cripple the US economy. Many of the consequential corporations would attempt to flee (so you'd have to implement some form of government-sponsored slavery to keep people in). A 100% tax would immediately begin to collapse the US economy as businesses would no longer be able to save for any future purpose (including recessions, business problems, unexpected opportunities, and so on) and they would fail rapidly.

The only tax source large enough to support a nation is an income tax on individuals. That's why, for example, no nation in Europe has ever attempted to fund their expensive and well-experimented welfare states in the way you're suggesting. They know it doesn't come close to working.

> The only tax source large enough to support a nation

The US did quite well for a time without income taxes. If I recall correctly, the US even went from a nearly destroyed nation to global empire, building up several colonial territories, and constructing battleships that went around the world, in a time period where there was no personal income tax.

I've never seen this proposal before. I'm curious what the consensus is that leads to it being downvoted so. I'm inclined to think this is a bad idea, but I'm not confident.

My guess is you'd see a small portion go to employees, a large chunk reinvested into the business, and a large chunk go directly to shareholders. If you managed to alter the structure of taxes so that shareholders paid more for capital gains and dividend income, I feel that's a better outcome than corporate taxes. But lingering doubts of the feasibility of doing so + companies just hoarding cash seem like large problems.

There has been consensus among economists for awhile that the corporate tax should be eliminated. https://www.npr.org/sections/money/2012/07/19/157047211/six-...

Agreed. Instead of taxing the profit of a corporation, just tax the payment of dividends from that profit. The total tax burden can still remain the same if that's what people desire, but the end result will be more transparency as you say. I think Estonia has exactly this policy, or at least they did last time I checked.

It also removes the incentive to mess around with stock buybacks, which is good because the extra liquidity can be put to better use within the company.

For very small companies (such as my own) it would also remove the bureaucracy involved in saving profits from one fiscal year to the next.

> Instead of taxing the profit of a corporation, just tax the payment of dividends from that profit.

This would be regressive, though. Why not tax the individual via a progressive cap gains tax?

> It also removes the incentive to mess around with stock buybacks, which is good because the extra liquidity can be put to better use within the company.

If a company can't think of a good use for their profits, do we really want to force them to keep the money within the organization? This seems like a recipe for bloated budgets and bigger Christmas parties, but I'm not sure that we could expect much benefit otherwise.

> This would be regressive, though. Why not tax the individual via a progressive cap gains tax?

How would it be regressive? According to Wikipedia[0], most corporate tax rates are proportional (i.e. "flat"). Just replace that with an equivalent rate on payout of dividends. Capital gains tax for the recipient is an entirely separate question.

> If a company can't think of a good use for their profits, do we really want to force them to keep the money within the organization?

In such situations they can pay dividends of course, which are taxed in my proposal. The point is that there is no point in buying back stocks instead of paying dividends.

[0] https://en.wikipedia.org/wiki/Corporate_tax#International_co...

> just tax the payment of dividends from that profit

My dividends are already being taxed as income. I agree with you, but good luck trying to convince Big Gov that they need to eliminate a revenue stream without picking up a new one.

An interesting thought exercise, but you use the term "supplier" as if it isn't itself a business.

And while I see what you're trying to get at, I think the idea is flawed. Taxed being "open and transparent" are good attributes, but not the reason, for taxes to exist. They exist to fund society.

Corporations and businesses, as entities, utilize public services. They wear roads, they take up land, they pollute. They should be expected to pay their portion of the upkeep to their local area.

I understand the idea of reducing the race to the bottom and city/country gamesmanship for tax evasion... which is what the linked proposal looks to solve AFAIK.

They do pay a portion though, through payroll taxes and their employee's income taxes. They also pay property taxes and shareholders pay capital gains taxes. I'm sure there are even taxes I am forgetting about. This is only talking about the tax on corporate profits.

Okay, fair I overlooked that. I'm so used to seeing free-hand libertarians decry all taxes, I made assumptions.

Also worth noting that corporate taxes make up only 7% of federal tax receipts, but likely incur a huge cost in terms of avoidance and manipulating practices.

https://www.cbpp.org/research/federal-tax/where-do-federal-t...

I am for 0% corporate rates as well, I personally think we should just raise the taxes on higher earners and rethink cap gains for people that sell large amounts of assets, but cut corporate taxes to 0%.

I'm trying to think through the ways this could be cheated. For example, if I own a business then instead of paying myself and then donating to a 527 political issue group I could instead have my business donate to the 527. Since the 527 is tax exempt that money never got taxed, but if I had to take the money as income first I'd have to pay income taxes. I'm sure there's other ways to take advantage of a zero percent corporate tax, or indeed even the lower-than-personal corporate tax rate already in place.

How do you deal with the complexity of taxing suppliers and customers of businesses?

How do you determine the value of goods exchanged and ensure these are equitably taxed?

What happens when you've got a mega-corporation that is both supplier and customer to another business?

What happens if they just decide to exchange goods well below market price and only settle the surplus/deficit of those transactions?

We need to stop taxing incomes of all sorts. Georgism for the win!

Is there anywhere that has tried this and what happened?

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