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Comment by peterbecich | Hacker News Reader

Why is a corporate tax necessary? It would be simpler to increase the income tax. EU has low corporate taxes and higher income taxes i.i.r.c.

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By income taxes do you mean personal income tax?

In any case, corporations benefit from airports / roads / ports / law enforcement / defense / education / etc... which are funded by local / federal governments. So corporations have a moral duty for to contribute to these expenses by paying taxes.

(But it is only a moral duty, and not a legal obligation. So corporations end up paying nothing, or next to nothing.)

The rationale for a low or zero corporate tax is that corporate profits eventually become personal income of the shareholders and employees, and can be taxed there. Nobody builds a for-profit corporation for zero salary or personal profit.

Hypothetically with zero corporate tax, if the corporation paid zero salary, zero dividends, and shareholders never sold anything, the corporation could amass ridiculous amounts of untaxed wealth. But this never seems to happen.

I mean personal income taxes, plus capital gains taxes, taxes on the individual -- I am in favor of; not on the corporate entity.

But why not just tax the owners of the corporation more to accomplish those same goals?

Why doesn’t the moral obligation rest with the owners of the company, rather than this legal construct that was created on paper?

Corporations aren’t rich people - they are machines that allocate capital and eventually return the money with profit to the owners. They can be owned by rich people, and we can tax them.

When we add taxes on corporations, we introduce compliance issues, accounting and forecasting requirements - all complications that take away money from the actual good things we can get from corporations - jobs in the community, better product development, etc.

Because rich people can reduce their income to 0 or close to 0 via different legal ways like LLCs, funneling through other corps, certain investments(which are basically tax-money laundering schemes), being tax residents of tax havens, etc. It depends on the country what you can do. In Germany, it's basically 0.

I wish you were kidding but I doubt it given how much taxes are loved on HN. Income taxes are too high as they are. Taxed when you earn, tax when you spend, taxed on property, taxed to use your car, to fill your car or EV, taxed on inheritance, taxed on capital gains, etc. It’s out of control and is making the income division worse. Corporations R posting massive profits, dodging fair tax payments through creative loopholes, and then our lawmakers mis-spend the taxes they do taken. The entire system is broken.

And I really don’t think the EU is a model for tax sanity. Look at eliminating loopholes, not squeezing the average Joe even more than they already are. Their shit salary isn’t even keeping up with inflation. But their taxes sure do.

I think because they don't get any dividend to trigger income tax, instead they get a loan against their shares and spend that and roll over the debt to infinity.

I feel like this is a myth people share without ever looking into. You service the debt with income that you make and pay tax on the income you service the debt with

They do not need to service debt using taxable income, they can roll it over indefinitely or until death, at which point the tax obligation disappears due to the stepped-up basis (capital gains reset on death)

I don't know what you mean by "roll it over", take out more loans to pay the previous ones? Just not make payments?

Bro, this is HN. Most of us here know at least one person who does this. It seemed pretty popular with the early Facebook folks. So this talking point that this is a myth isn't going to work here.

Well by all means educate me, do these people just not make payments on the loan? Take out another loan to pay the first one? I just don't see how taking out loans prevents you from paying taxes on income, assuming you have to make payments with some income somewhere.

If they need 10 million for a house they take out a loan against their stock for the purchase. They then only pay tax on the income to service that loan, not the entire 10 million.

If they gain more on the 10 million still in stock than the interest on the loan the numbers benefited them. They effectively have 20 million in assets working for them for the modest debt services and without a tax haircut. In the other case they would have half the assets working for them plus would have had to pay 2 million to get those assets.

Meta is up 240% in the last five years. Which is better, not paying modest debt service and paying 2 million taxes AND missing a 240% gain on 12 million (home cost plus taxes), or keeping the 10 million working for you (and the 2 million you didn't pay to taxes) and gaining 240% on it?

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