Of course it is their income. And for the vast majority of corporations, it gets taxed immediately (less accounting time) at their individual personal tax rate.
It sounds like you don’t adjust your risk profile based on expected returns. Good luck. Back in reality, I certainly already keep money under the mattress, so to speak, and would revaluate my exposure if the government were to keep more of my returns.
What a strange argument.
The government isn’t “owned” by the people, at least outside of a metaphorical sense. But the corporation is, in fact, owned by the shareholders. To own a share is quite literally to own part of the company, and the part of the company they are most interested in owning is the corporation’s income stream. They have a literal claim to that income stream. Without the existence of an ownership stake over that income stream, sold to shareholders, the corporation would not even exist in the first place. That is what shareholding is.
The corporation does not exist for its own sake. If we’re trying to calculate a potential investor’s incentive in purchasing part of a corporation, or in creating a new corporation, we’re going to be interested in the after-tax income of all the income streams they are willing to own. This means if we’re trying to calculate the total tax on capital income – based on the the literal ownership of the capital – then in our calculation, we’re going to have to hit the multiplication key on our calculator two times, once for the initial corporate income and a second time for dividends.
I have literally done this calculation before, and it was not for “political” purposes – which is another totally bizarre argument from a different poster – but to determine the actual underlying value, post-tax, of that income stream in order to determine how much that income stream should be worth to new investors in a macroeconomic model. You have to know how much the stream is worth to determine if investors might want to create new capital equipment. The higher the net income stream is taxed, the less attractive the investment.
This is one of the stranger conversations I’ve seen here. At the end of the day, I guess it’s just a term. You guys can call it whatever you want. It’s not the biggest deal in the world.
But people like us who actually work with this kind of stuff tend to call it “double taxation” for the extremely simple reason that the income stream is taxed twice. There is not some huge terminological mystery going on here.
Is the corporation a separate entity from its owners, or is it not? If it is, then we tax the transfer of wealth between those entities. If it’s not, then there are a whole lot of other areas of corporate law that we need to revise, too. But it makes no sense to argue that it’s separate when that’s beneficial, but just the same entity as the owners when that’s beneficial.
And what do you mean by “income stream”? That company probably made its money by selling some product, and sales tax was paid then. Is that part of the same “income stream”? What about whatever the buyer did to get that money? Is that the same “income stream”, too? Why not?
Here’s cartoon explanation that may be clearer:
Sales tax is paid by the consumer, and sent to the state. It doesn’t affect the corporation’s income stream, at all.
This is false. If I personally owned a chemical manufacturing plant in, say, Bhopal, and there was a horrible disaster that killed thousands of people and crippled many more thousands, those people would have every right to sue me for every dime I owned, even if that amount were well in excess of the value of the plant itself.
If I own shares in a corporation that owned that plant, my liabilities would not exceed the value of my shares, absent unusual circumstances.
Why? Because stockholders don’t own part of that plant. Ownership share in a corporation is fundamentally not the same as ownership of part of the things the corporation owns.
You have every right to not use a corporation and own things directly, or even for a group of people to personally own portions of a property. But if you do that you get neither the advantages nor the disadvantages of the corporate structure.
The rest of your argument falls apart because of this fundamental misunderstanding of what a corporation is.
Does anyone have any examples of actual double taxation, as opposed to legally distinct entities such as a corporation and its shareholders being taxed separately?
Okay.
But I’m not sure why this is supposed to be in response to my post, in which I didn’t offer any such argument for you to criticize. I haven’t made any criticisms at all of double taxation, I just pointed out how the definition is sometimes used. I explained why double taxation is defined as the way it is, at least in my personal experience. That’s it.
If you’re asking for definitions, I can give both the standard economic terminology and the reasons behind those definitions. (Don’t ask me about the legal terminology, which does not perfectly overlap. I think Damuri Ajashi is a tax attorney?)
If you want my opinions on tax policy, you’re out of luck because that’s waaaaay too complex a topic.
I’d be happy to define what an income stream is, as conventionally defined in economics. If you ask, I’ll do it. I just don’t see what point that would make for you. You might think the definition makes sense, and you might think the definition is silly. Either would be fine. No problem. But understanding the definition of the word isn’t going to change your opinions on tax policy. The term makes sense in the context I already gave. Providing more context isn’t going to change anyone’s minds on whether it’s a good or bad thing. It’s just a definition. Reality does not bend to the definitions we use.
It is abundantly obvious that a small subset of people in this thread are objecting to the term for purely partisan political reasons. That’s unfortunate, but it’s good to know. If Fear Itself feels an uncontrollable urge to post irrelevant political comics from 2003 (!) whenever the horrific term “double taxation” comes up, well, then, it might be best to avoid that term in the future. It’s something I’ll definitely keep in mind.
Here’s what I already said.
Obviously there is political baggage here. Some people on the right used the term to argue they should be taxed less, and now a few people on the left are objecting to all uses of the term regardless of context. So it goes.
I specified that ownership of the corporation was ownership of the income stream of the corporation.
I don’t see how you got from my post any implication that ownership of the corporation was explicit ownership of all items owned by the corporation. The part of the paragraph that you quoted specifically says a stake in the income stream, and the rest of the paragraph which you snipped continues talking about the income stream. I don’t personally see how the factory in Bhopal relates to what I wrote.
But if my post was somehow unclear, then I’m happy for your clarification. I don’t disagree with the substantive points you made.
Assuming that there was a sales tax on the services provided by the plumber in part B of Fear Itself’s very strange comic from 2003, then depending on how you slice it, the sales tax that the employee would incur during part B of the tax cycle could be considered double-taxation on the wage income earned by the same person in part A. The whole point of wages is to finance consumption, either now or in the future. (Income from capital is derived from deferring consumption from now until later.)
Let me google that for you. Either way, none of this matters. If some individual doesn’t think a corporate structure provides any benefits for which it’s worth paying taxes, they don’t have to incorporate.
Yes, it primarily is. Do you think this term today is being used mostly by “tax professionals”? Of course not. Google the term and see how many come back to apolitical tax sites.
No, it’s not. It’s income in both cases that is passing through two different entities. The issue is you want to pretend a corporation isn’t a separate entity when it is. This is why owning Google stock doesn’t automatically entitle you to a cut of their profits. It’s also why owning stock in company that gets sued into bankruptcy doesn’t typically attach to the shareholders. It’s also partly why I could buy 51% of Facebook shares, and still not be able to wrest control from Mark Zuckerberg.
Of course it does. This, again, is highlighting my point that term isn’t, “double income taxation”, it’s “doule taxation”. Given we are discussing the latter, and the above example obviously applies in a strict sense, we can be pretty sure we are not using the term strictly.
Just because it can be apolitical doesn’t mean it is used that way in a given case.
Magic Wand time? Sure…
One Third of Gross, calculated before all other taxes, but paid after all other expenses are paid. Calculated by the Government if the numbers submitted to the IRS look in any way circular or suspicious.
Should any private firm submit numbers that are not only suspicious, but recklessly in the tax payer’s favor without merit, The fine shall be 100,000 times the total erroneous deduction
signed off on by the engagement partner, with both The Client and The Firm sharing equal responsibility.
Such debt shall not be dis-chargeable by any Bankruptcy Action.
You never said it had to be Constitutional…
If you mean yourself, why are you choosing to do this? If you mean someone else, I have no idea how you would be able to read their minds in order to support this claim.
Bhopal was merely an example, you could choose any other scenario in which liabilities far exceed share value. The point I was attempting to make is that share of a corporation is fundamentally different than partial ownership in the corporation’s assets.
No stock of which I am aware entitles the holder to a share of the “income stream” of a corporation. Actual stocks may pay dividends, but they’re not strictly proportional to the income, and I don’t see how that could possibly work without taking the corporation’s costs into account.
What you seem to be talking about is a proposition bet on a company’s income. If I were to make such a bet, I would expect to pay income tax on the result if I made money on the proposition bet.
Fundamentally the desire here seems to be to be counted as an owner for purposes of taxation, but not as an owner for all other purposes. To allow this would be unfair. An enterprise may be structured as a corporation, in which case stock holders are not partial owners of that enterprise, and in which case claims of ‘double taxation’ are nonsense. An enterprise may be structured as owned jointly by several people, in which case taxes would be paid just the once but the attendant disadvantages of actual ownership would apply.
In practice, the former structure is already preferred more often than the latter structure. I don’t see why we need to provide additional incentives in favor of it.
I would like to hear from your uninterested selves.
Or else imagine we are talking about the tax policy of the United States of Vespucia.
How do you justify whatever your answer would be?
Limited liability and corporate ownership are separate concepts, and corporations existed before limited liability was applied to them. My liability is limited because the powers that be have decided to limit it, provided the right hoops are jumped, independent of my status as an owner of the company or companies in question.
It is true that there exist corporate models that do not limit liability, but they are rare and the exception to the rule. The reverse, actual ownership without liability, is not available at all. So, I think this is still a good example to illustrate that ownership of stock in a corporation is not the same thing as partial ownership in the assets of that corporation.
So I don’t own my SMLLC and its assets?
No, you own your SMLLC. Your SMLLC owns its assets.
Well there you have it folks. This poster thinks you don’t own the assets of a company that you own and control in its entirety, just because your liability is limited.
Trying to drag the point back to the OP…
The capital markets have spoken, and for the most part under the current system of taxation they seem to prefer a corporate structure to a structure of joint ownership of the same enterprise- which would not include the particular tax burden of taxation at the corporate level. (Which some have attempted to deceptively label as ‘double’.) The other benefits society allocates to the corporate structure outweigh in most cases the status quo’s tax burden on that structure.
The claim that taxes are too high for that ownership structure is flatly contradicted by the observation that the vast majority of investors choose that structure even given the status quo level of taxation. I would suggest that watching where the money goes would be instructive - modest raises of the rate or loophole closure might be attempted, keeping an eye on whether this changes where the money goes.
All other things equal, I think that reducing the layers of corporate abstraction would be useful. Modifying the tax code to encourage models like joint ownership rather than the status quo encouragement of a byzantine corporate structure seems like a good idea to me.
You were expecting the law to make sense? I am hardly the first to observe that corporate personhood creates paradoxes.
Do you believe that the person making $5k per year should still receive SSI
and Medicare based upon that $5k? Then why should they not pay for it?
Do you believe that a person should be paid SSI for amounts above $115k per year? If not, then why should they pay for it?
Keep in mind that people who make low wages are more than reimbursed for their SSI and Medicare taxes through welfare payments in the form of the Earned Income Tax Credit. You know those people who pay $1k of taxes into the system but get a $7k tax “refund”?
I don’t see a problem with the “rich”. The problem is a system in which 47% of people do not contribute to the federal income tax. Many of those 47% actively take money from the feds in the form of various social welfare programs.
A national sales tax is a great idea to even out this playing field.