But the owners are taxed again after the corporate benefit is already taxed.
There are strategies to minimize the dual taxation. If there weren't there would be few C Corps or LLCs electing to be taxed as corporations.
Further, the corporation acts more in the interest of those who don't own it. The beneficiaries are the public at large.
I don't see how you can make such a broad claim.
I suppose you are speaking from the frame of reference that "Ultimately, satisfying demand of the public at large should determine the survival prospects of corporations" in general, regardless of ownership or management graft.
So the taxation they incur is a tax on the public at large. The public taxes the corporation and the corporation merely passes the tax back to the public in higher prices.
I have no objection to this statement. Ultimately the tax dollars have to come from someones pocket. Corporations are used to shift this burden to someone else in many cases.
The result is that the corporate tax just makes the corporation less efficient at meeting its primary responsibility of supplying the public with what the public demands.
I disagree. Corporations have learned to structure themselves given the current environment. Strip out the ability of a corporation to shelter retained earnings at a lower effective tax rate and you will see a dislocation and perhaps reduced capital formation short term.
And I agree. See my subsequent posts to Don about the distortions introduced in an effort reduce tax liability. Ultimately, corporate tax avoidance mechanisms increase costs to society.
High net worth individuals don't own or control the bulk of privately held corporations. Your Baran and Sweezy is showing.
I don't get the reference to Baran and Sweezy. I'm not as well read as you or Don. I am working on assumptions that may be incorrect. I suppose it might make a difference if you define bulk of ownership in terms of nominal number of entities, revenue generated, owners equity, taxes paid and so on.
The public at large, mostly middle class, are the owners. You forget your basic pension theory.
Basic pension theory? Have you not heard the plebes are expected to fend for themselves? Defined contribution plans are out, self managed 401ks are in. And I believe that the publicaly traded corporations are far outnumbered by privately held. You suggest that the middle income class owns the bulk of these companies, and I disagree. I think the bulk of the middle income class doesn't have the financial sophistication or scale to leverage these structures to their benefit. Sure, some may own a drycleaner inside a corporate shell.
I read it to mean that corporations are taxed to make sure that greedy capitalist pigs who would hide behind the corporate form to avoid taxes pay their fair share. If that is your intent you're saying that less is better for some and the only justification for such a claim is the Robin Hood theory of economics.
Is that a perception or projection?
I meant what I said. Those with the financial sophistication to leverage corporate structures to minimize their tax liabilities are doing so on voluntary basis, and that reducing the corporate tax rates will reward these individuals and further incent this behaviour.
I made no judgement about the right or wrong of using corporations in this manner, only objected to the sale of a proposal to eliminate corporate taxes under the guise that corporate taxes are ultimately just a tax on end goods and services anyway, without any mention of the reality of how corporations are used to retain wealth and control resources. These mechanisms result in inefficient activities that don't serve the public good, IMO.
Please tell me what's the difference in the effective rates between these alternatives.
I cannot do so.
Retained earnings taxed at a lower rate form the basis of capital formation, capital that may subsequently be used to acquire assets using pretax dollars to the benefit of the controlling asset. I see this as the foundation for wealth creation over the past century, and vital to economic growth.
This is a tacit admission that there is no difference in the effective rates.
No, it's a cost benefits analysis done not by me, but by the individual making the election. If the motivation is to accumulate capital, income is retained and taxes paid at a corporate rate. If the motivation is to generate income or losses to offset other income, then a pass through entity is selected. Typically losses are passed through in the early years then an election is made to be taxed as a corporate entity to build assets at a lower tax rate.
But as soon as that money is brought out of the "corporate shell" it is taxed again at full ordinary rates. So what is the purpose in accumulating fictitious money? You can fool bankers to give you loans?
There are strategies to manage this issue. I suggest:
amazon.com
for starters. I'm not about to try to document the range of techniques in this little box.
What good are assets if they generate income inside the "shell"? The beneficiaries don't get the results of the generation until they take it out of the shell. Then it is heavily taxed. The only shell that is going on here is a shell game.
Wrong. Read further, explore the options available. The exit strategy must be considered before the corporate shell is created to create the most wealth and least tax.
Just like in your previous discussion about paper shuffling you seem to think that someone can get something for nothing.
Legal use of pretax dollars vs post tax income.
The above example doesn't change the taxing consequences, since the form of cost of doing business is different in comparison to say sole proprietorship. Keeping expenses in the corporate shell diminishes the total worth however it is accounted. If corporations and individuals are taxed at a flat 10%, please tell me the worth of your argument.
If a flat tax as you suggest were implemented, economic frictions would be reduced.
This example shows how high taxation drives people to circumvent paying taxes. The thing is that the example fails to accomplish its end. You've omitted many critical details that make this method a wash.
I did not attempt to explain in detail how the strategies work- that would take several books or good advisors. I merely proposed that such mechanism exist and are utilized. The interested reader will learn the details through other avenues.
In fact, this claim, "Income transfer in the form of rents may be treated at tax time differently than income thrown off by the active operations or salaries", is fraud since it is explicitly intent to deceive and the owner will be audited monthly.
Again, some study on your part here is required.
Isn't there a valid business expense whatever form it may take? To what behavior are you referring? The behavior based on your false assumption that "goodies" can be hidden from the IRS inside a corporation under the guise of business expense?
Legitimate business expenses, such as a board meeting will survive an audit.
Outside of this childish punishment bag tell me what is the value lost when an efficient entity like a corporation is constrained from being more effective at what it does by being taxed? You give up a lot just to punish which gets nothing. The illogic of it is astounding as rationalized ulterior motives to falsely solve the class struggle always are.
What is this obsession with what others get in life? It's all built on the materialistic view that the only thing that counts is material. No wonder it's primarily the rich who resist efforts to cut taxes on capital gains and corporations. They seek to differentiate themselves from the slobs. Cutting these taxes would surely make most so well off that the rich fear their presumed superiority would not be so well delineated.
Ho ho ho... |
