How would you avoid companies-as-expense accounts? If I form "Coral-Snake & Co.", wouldn't I be able to pay 0% taxes by just directing all income/expenses into that shell?

(Granted, I don't understand basically anything about tax law, so maybe this is already a well-defined problem with a well-defined solution.)

By making it illegal. People already do that and when they get caught they sometimes go to jail or otherwise pay severe penalties. Also a company with no profits already pays no taxes so to the extent you wanted to roll the dice this way you could do it just as well under current law.

This is already doable with a multitude of ways. If I have profits, and I direct them to a business, then argue plausibly that my life expenses (lunches, travel, cars, computers) are for my business, I can write off all those expenses against my profits. Business owners do this all the time.

Business owners that do that had better be very careful and keep plenty of documentation. There are legal "tests" (read requirements) that must be met for those lunches, travel, cars, computers, etc. to be considered an expense. In many cases, any "non-business" use/benefit/enjoyment renders the entire expense not a business expense. Yes, it is not so rare for small business owners to play loose with the rules. And then they get audited and end up paying a lot in back taxes.

Wouldn't a 0% corporate tax make it even more incentivized than it is today?

As a novice, this feels like an approach that punishes the well-off, who may not expend the resources to structure all assets/liabilities this way, at the expense of the super-well-off who will simply pay multiple other people to re-organize their own financials.

You can already show a $0 profit today and pay no income tax, but a business that generates income will always pay sales, payroll and other taxes anyway.

No, you'd have to show $0 income (ignoring for a moment the low 0% tax bracket). So, very much negative profit, unless you're not paying rent, fuel for your car, food, not to mention taxes like property taxes, sales taxes, etc.

Corporate taxes in the US are based on business profits. $0 profit = $0 net income (gross income minus expenses) => $0 income tax.

There's no such thing as a negative profit. That's called a loss.

by my reading the parent was comparing personal income tax policy with corporate income tax policy, and as a person you can take a loss and still be taxed.

You can make a good argument* that taxing corporations is weird anyway, since they're abstract legal concepts.

Taxing the income real people get paid from the corporation would be the logical, and much simpler system.

* You can of course also make a decent argument against this :)

Corporations have similar legal rights to corporeal persons. Freedom of speech, access to the legal system, etc. As a result of having similar rights, they should be taxed as corporeal persons. It is not rocket science to conclude that corporations in the U.S. should be taxed at the same effective tax rate as real persons.

Corporations are just bundles of stuff that people own. They have legal personhood as a convenient legal fiction because it would be obnoxious if all of the owners had to get together to sign things, and they have rights because people don't lose any of their individual rights just because they happened to form a corporation together. But at the end of the day, bundles of stuff. Economists seem to be broadly in agreement that tax systems would work better if corporations didn't pay income tax.

Yeah, this "corporate personhood" issue is so dumb.

All it is is that the legal system decided it would make sense to apply the same laws in some areas to both companies and humans, rather than design completely separate frameworks for each case.

In HN terms: This is code reuse/refactoring.

Maybe I am wrong on this, but I doubt that you have studied economics or have any idea what economists think.

The people that you are talking about are effectively lobbyists - policy entrepreneurs is the phrase, who appear in the media advocating for policies that benefit their clients.

Feels like an aggressive response to what I said. Feel free to look it up, the statement is noncontroversial. There are regularly conducted surveys of the field that include questions on this topic.

What about the inverse. What if individuals didn't pay an income tax but corporations did, kind of as a "user fee" for the privilege of having limited liability.

Mostly because corporations are pretty different from people. They can own each other, buy and sell each other, split in two or be combined, etc. And they they can deduct business expenses in ways that people can’t deduct living expenses, because we rationally recognize that corporations mostly have lower profit margins than the tax bill would be on total revenue (and some always will at any tax level).

Corporations just tax their profit. Persons have to tax all their income (with minimal exceptions). How is that fair?

Because different industries have wildly different profit margins so if you taxed revenue instead of profit, companies in some industries would be wildly undertaxed while others would instantly go out of business.

Humans, on the other hand, all work mostly the same.

For individual capital income, you are also only taxed on profit (although some presidential candidate are trying to change that with wealth taxes).

And just like the real person cannot get a write off for things required to live or things that make them more attractive on the market, neither should businesses. If I have to pay taxes on the income I spent to repaint my house, why shouldn't a business have to pay taxes on the revenue they spent to repaint their building?

Because of this: https://news.ycombinator.com/item?id=22370387

Wouldn't the costs be updated to reflect the difference in profit margins. If the tax is 10%, then in cases where the profit margin is razor thin prices would rise by about 10%, but life would otherwise keep on going. If an entire industry would die from such, then doesn't that mean that currently tax payers are subsidizing that industry to keep it alive by having uneven taxes, if the standard of equal taxes is the purposed change?

Are you trying to say that tax payers are subsidizing the entire retail industry? No, that is definitely not the case.

Different amounts of value are added at different stages of the product pipeline. These different amounts of value are reflected in different profit margins. Forcing uniformity here via the tax code would be massively distortionary.

Then you get companies leasing jets, houses, etc for employees uses instead of pay.

all that is properly considered income for the employee. of course, if the co. fails to report it, then it's a difficult matter to police.

This is already regulated. The current 21% corporate tax rate would be enough to make it very attractive otherwise.

And there are already rules which are supposed to cause non-business use of jets, houses, etc to be personal taxable income.

As a business owner, I fully support this. There are plenty of other taxable outflows like payroll and sales. Having 0% corp income tax would also encourage spending and growth without trying to write down everything as COGS.

Also LLCs operate this way already with pass-through taxes which is why they're used so often in real-estate. It allows for limiting liability and splitting ownership and management without adding a whole new tax basis.

I'm wary of incentivizing corporations as a personal wealth vehicle, but I still agree with you. Payroll, sales, capital gains, and value added taxes are a great place to shift or grow tax revenues should we ever reduce the corporate tax rate.

The point of capital gains taxes having a separate rate lower than income tax is mostly to account for the fact that corporations pay income tax, so income received from corporations has already been taxed once. One of the perks of abolishing corporate income tax is that it naturally should be paired with abolishing the distinction between capital gains and earned income, a double-whammy of tax code simplification.

What about closing the loopholes? They're known for decades, why not stamp down, with teeth, on this sort of thing?

There will always be loopholes. Any corporate tax rate above 0% will have carve outs for any number of industries that are favored for any number of reasons. If it was 0, huge swaths of busy-work jobs in law and tax industries would go away. They provide no value to society.

But in a capitalist system, that which could be good is a problem. Now you have swathes of people who become unemployed. You now probably have to support them with welfare (and without corporate tax revenue to boot :)).

Wouldn’t business still lobby for tax reductions in other areas? I feel like your argument that setting the corporate tax rate to zero would eliminate the incentive to influence the government ignores the many other reasons to do so.

They would lobby for regulations but this would eliminate a huge amount of economy-warping tax carve outs and prevent a lot of crony capitalist donations to politicians.

I think most people advocating for 0 income tax (corporate or personal) advocate replacing that tax with an increased sales tax instead.

That way you don't have to mess with income reporting, deductions, loopholes, etc. Just pay a % of each transaction directly to the government. Credit card companies and banks could even automate this so it's completely transparent.

Most people (that I know of at least) advocating for 0 corporate income tax would like to see it paired with eliminating the special tax rate for capital gains and rolling capital gains income into earned income.

How do you then deal with "Business A pays no corporation tax in country X, moves the money back to country Y, where there are low capital gains taxes, and gives it to the shareholders there." - which means that country X gets no taxes at all, despite that being where the business happens.

Just capture it all as sales tax when the money is coming and and income tax when it being distributed to employees. get rid of corporate tax for ANY business, small or large.

Unfortunately, that policy creates a perpetual motion machine.

This is a 100% reasonable policy, but it's a really hard sell for people who don't understand how business income actually works, and how the money would be captured by far more functional taxes as dividend income or cap gains. I don't think your comment is going to do well on HN.

Maybe leave INCREASE CAPITAL GAINS in all caps. Or, CAPTURE THE SAME MONEY AS DIVIDEND INCOME OR CAPITAL GAINS.

Perhaps: IT IS THE SAME MONEY CAPTURED LESS CONFUSINGLY AND LESS PRONE TO CHEATING

Many of my comments do poorly on HN, but I’ll keep writing them because alternative opinions to the hive mind are valuable. I may even convince a few people!

You might want to try leaving better comments? The one at the top doesn't really make any sense. If you left one that did convince people, it would probably get upvoted.

Given all the other comments it sounds like many people agree with me. What part didn’t you understand?

"Many of my comments do poorly on HN" -- silbelj

Your insult is a good example of why you might be downvoted.

I liked the comment thread you started. Thanks for bringing your ideas here and defending them in a reasonable and rational manner.

That allows the unlimited concentration of wealth which can then be used for political purposes.

There should also be no speed limits, since some people drive too fast anyway. And murder should also be legal, since some people murder anyway. Let’s just remove all laws, since they’ve all been broken at some time.

That's nonsensical and not even close to what was being said.

Taxes are not a moral issue nor do they have a victim. The proposal isn't to eliminate them entirely, only to remove corporate income tax and make it up in other changes for a net win for the economy, and it's perfectly reasonable to discuss.

Your argument is totally irrelevant to corporate tax rates. I’m not advocating for legalizing murder, stop being ridiculous.

The key difference is there is no large industry of lobbyists working for reckless driving and murder. If there was, I daresay some rethinking would be in order, even in these cases.