This removes the distortionary effects of taxation on corporations, but maintains tax revenues in a somewhat progressive structure.
There's also the fact that corporations are only made possible in the first places because of the infrastructure and services provided by the government, and those must be paid for. If we moved to a model where companies were responsible to building and maintaining the proportion. Of infrastructure resources they used then indirect funding of such things via taxes would be required as much.
Valid point, but are there other ways to incentivize companies to reinvest profits without the incentive being tax avoidance?
I would be a proponent of 0% tax on small-ish corporations, perhaps with profits under $1 million (or maybe $5-10 million), so that small businesses who can’t afford an army of accountants to hide profits are brought up to a slightly more level playing field with bigger corps.
>find even more creative ways to give it to themselves
This is not a good argument.
That is not a good rebuttal, it ads nothing to the conversation except to say "I disagree" in a slightly more adversarial tone.
It need more explanation: Is it a bad argument because you think giving it to themselves is okay?
Or is it a bad argument because you don't think that would happen?
If it's the later, recent events show you're incorrect: corporate tax reductions were used in stock buybacks that significantly benefited upper management by selling their own stock back into the stock price increases.
And clearly R&D was not incentivised under those tax reductions. Also R&D is a long term investment. There's no reason to believe the short term thinking that often governs corporate decisions wouldn't also win out here. Companies that try value R&D would continue, and those using it simply to avoid taxes would reduce or stop investing in it.
This is simply not true. The investment equilibrium would change in favor of less investment in _lower_ return expenditures. Corporate managers would likely distribute more capital, which would then be reallocated efficiently in the market. The only hitch here is that the government would likely collect higher tax receipts, and thus lower total investment. But that's an argument for lowering the tax rate on investment income, not creating bad incentives for corporate managers to spend money with a lower marginal rate of return than their core business.
>There's also the fact that corporations are only made possible in the first places because of the infrastructure and services provided by the government, and those must be paid for.
Corporations pay property taxes, use taxes and payroll taxes already (e.g. truckers pay gas taxes, and that's reflected in retain prices etc). And since the proposal is for revenue neutrality, the delta revenue is still collected on the distribution end.
>Of infrastructure resources they used then indirect funding of such things via taxes would be required as much.
You can simply look at the budget. The vast majority of government spending is on income transfers, administrative expenses for social programs and jobs programs (the largest of which is bombing people in foreign countries). A very tiny sliver is infrastructure that corporations use. And as pointed out above, most of that can be paid for via use taxes they already pay.
The use taxes you're referring to are mostly going to state-level entities and state infrastructure. They're not going to pay for the federal resources, and I mentioned services, not just infrastructure. Heck, the amount of resources they use in government legal services, courts etc alone are significant costs that companies pay practically nothing but miniscule filing fees to use. Further, even those state level taxes are often minimal in the race to the bottom of states giving massive tax cuts that negate much of the revenue for the sources you mention.
As for annual spending on infrastructure: yes, that is at least partially right and is exactly why we have an infrastructure crisis in the country with aging facilities, bridges, etc and no money to pay for it. Whatever companies are paying in use taxes, it's certainly not enough to keep pace with our needs. Are you an advocate for use taxes, or was that just a rhetorical device? Because if you really believe they are appropriately paying use tax, and given the infrastructure crisis, you should be all for increases to those use taxes.
That doesn't change anything about why corporations should be taxed, unless you also believe that individual people should not be taxed either. Because after all the company is only people so it should be taxed because it's people that we tax. To break it down into pieces:
1) Corporation are made up of people.
2) The money those people receive directly from the company is taxed
3) The money received by the company is also received by people because the company is, after all, only a group of people.
4) Since money held by the company is also just people's money, and people's money is taxed, the company's money should be also be taxed.
Why should money received by an individual be taxed but when it's pooled & received by a group of people it remains untaxed?
I actually know the next response in this chain: If it's taxed at the corporate level and then given to individual people who are also taxed, it has been double taxed. There's an easy solution to that: The company shouldn't hold on to the money long enough to have it taxed. Keep giving it back to people, pay higher salaries, or invest in R&D.
In that way, it's not even a tax on profits as much as it's a penalty for keeping the money stagnant. By keeping it stagnant you keep it from contributing further to the economy and from receiving enough taxes from individual taxation to pay for all of the infrastructure & other services provided by the government.
With limited liability.