Revenue taxes create predictably perverse incentives with fairly pathological outcomes. There is wide agreement that it is a poor way to tax business entities, with many undesirable side effects. Notably, the most tax efficient business structure is one that is maximally vertically integrated to minimize the number of transactions with suppliers.

Small companies end up paying a higher effective tax rate than larger more integrated companies and it discourages companies from specializing in what they are good at, neither of which is conducive to a robust and vibrant economy.