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To: Don Lloyd who wrote (3128)	10/17/2001 10:22:57 AM
From: GraceZ	Respond to of 24758

So when do we start throwing tea into the harbor?

To: Don Lloyd who wrote (3128)	10/17/2001 1:19:41 PM
From: Mark Adams	Read Replies (2) \| Respond to of 24758

Ho ho ho, great imagery. I read something you authored last night that seemed brilliant on the face, but with which I have an opposing view on. I agree that the current situation layers taxes on taxes and hides the true picture of the real tax burden. Corporations are separate legal entities, who enjoy and convey certain benefits to their owners. As such, on the face they deserve to be taxed just as individuals on the face. However, the stronger case for taxing corporate entities is their real world use in managing tax liabilities for higher networth individuals, who own or control the bulk of privately held corporations. An individual/group that decides to incorporate has the choice of electing use of a pass through structures, that eliminates the double taxation issue while retaining limited liability. So they voluntarily subject themselves to the corporate taxes. Why? Well, for many reasons. An individual who wants to build networth can elect to retain earned income inside the corporate shell, paying the corporate tax rate at 15% or 25% rather than personal income tax rates which in some locals can exceed 50%. Then a corporation can buy assets with pretax income, further reducing bottom line income yet increasing the resources available to the individual/group that control that corporation. For example, the corp can buy a company car and provide use of it to employees/owners. A corporation can pick up the tab for business travel, say to Hawaii for board meetings. Finally, it is often possible to use a set of corporate entities to effectively change the characterization of income. For example, a hotel owner can have one entity hold the mortgage and lease facilities to another entity, who operates the ongoing business. Income transfer in the form of rents may be treated at tax time differently than income thrown off by the active operations or salaries. In conclusion, it is common to use privately held corporate structures to effectively reduce total tax burdens. By taking the corporate tax to zero, you are reinforcing this behaviour and increasing the effective distortions that the tax rate differentials create. ...Re: "Corporations should not pay tax, they are the engines of economic growth." Sounds good in theory; falls flat in real life. Let's look at a few numbers:... Corporations, being fictitious entities, do not, and cannot, pay taxes. Only people can pay taxes, and the taxes that corporations appear to pay are really incident on shareholders, employees and customers, with almost everyone affected in all three of these categories simultaneously. Corporate taxes are merely another solution to the political problem of how to hide taxes so that people do not realize just how much they are being taxed. As with all taxes, there are several economic distortions produced which contribute to a reduced standard of living. Not only do the hidden corporate taxes result in multiple taxation (effective taxes on the after-tax remainder of other taxes), but corporate taxes create the perverse disincentive of differentially rewarding failing companies at the expense of profitable ones.