Thinking about Corporate Tax

So, why do we tax corporations? The reason is because governments can. But when you think about it, governments already tax income gained from corporations in terms of salaries, capital gains, dividends and such. Think of that as the money flowing out of corporations to people. So why should government also tax the money coming in? It is a double tax.

Estonia did away with its corporate tax a while back. It only taxes income received from corporations. Does it work? Yes. Does it stimulate more corporate activity and therefore income generation? Good questions. Theoretically, it should. The longer you keep money in the corporation, the longer you postpone paying tax on that money. So, there is an incentive to re-invest. Living here, I would just say that it doesn’t hurt.

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