Right-Wing Lauds Saverin Decision To Renounce Citizenship

[Terralthra]

One way to game the system is to simply take a salary at the corporation you own for example.

Not really key to the argument but that's precisely the worst way, because then you're double taxed at 35% (presuming it's not such a piddling business you dont enter high band income tax, in which case you're not rich anyway) both times, rather than at 35% then at 15%.

See, this is what happens when you don't read posts correcting you on your mistaken claims. Wages paid are fully deductible from corporate taxable income. Businesses do not pay income tax on the money they take in which are then paid out as wages. Your business doesn't pay tax on the portion of its income which is declared as wages paid. So the aforementioned salary is taxed only once, as as individual income.

[PainRack]

Sorry for the delayed reply. I'm having internet problems at home.

Conquerer,I'm not sure if you realise you're shifting goalposts. I disagree that corporate/capital gains tax is double taxation,primarily because the tax is levied on two seperate entities income,with tax deductions applied twice.

It doesn't matter if the source of the income received two seperate oppurtinities to be taxed. We certainly wont consider this angle when considering interest payments or household income.

[HMS Conqueror]

A corporation is a legal fiction that stands in proxy for its shareholders. That's really it. You know when people argue "Corporations are legal persons?! That's insane!" They don't mean "Corporations are legal persons - wow, I guess they really are totally separate entities with thoughts and feelings of their own!".

(ofc the first group is still dumb, because they don't realise the corporation is just exercising rights the shareholders already had)

[Terralthra]

Not all corporations have shareholders, moron.

[Block]

Not all corporations have shareholders, moron.

Yeah they do, they just don't all have public shareholders.

[Terralthra]

Not all corporations have shareholders, moron.

Yeah they do, they just don't all have public shareholders.

Untrue. The US Postal Service, for example, has no shareholders, despite being a corporation. Sole proprietorships have owners, but that owner is not a shareholder, no shares exist and no dividends are paid. Shareholders are a feature of many corporations, but not all.

[fgalkin]

Not all corporations have shareholders, moron.

Yeah they do, they just don't all have public shareholders.

Untrue. The US Postal Service, for example, has no shareholders, despite being a corporation. Sole proprietorships have owners, but that owner is not a shareholder, no shares exist and no dividends are paid. Shareholders are a feature of many corporations, but not all.

The USPS is not a corporation, and neither are sole proprietorships.

I think you may be confusing "corporation" with "business entity"

Have a very nice day.
-fgalkin

[Terralthra]

You're right about the USPS. I had thought they were a corporation owned by the government, but they are only "corporation-like." Instead, let's go with the Federal Deposit Insurance Corporation. Who are their shareholders?

[fgalkin]

You're right about the USPS. I had thought they were a corporation owned by the government, but they are only "corporation-like." Instead, let's go with the Federal Deposit Insurance Corporation. Who are their shareholders?

The United States government.

Have a very nice day.
-fgalkin

[Winston Blake]

If you have to pay VAT/GST on top of income tax, does that count as double taxation? If you have to pay licensing fees, would that be triple taxation?

VAT and sales taxes are double taxation. And no one denies that VAT/sales tax add to your tax bill, they just tend not to include it in a calculation of tax as a percentage of income because the amount of VAT any given individual pays varies wildly depending on how much and what they buy. This is why these are often called "stealth taxes".

Nb: I'm not arguing that double taxation is bad, only that it exists. You can make an honest argument that people with corporate income should be double taxed at 35% both times, rather than at 35% and then at 15%. Not necessarily one I agree with, but I'm not arguing against it here.

This seems like an argument over definitions.

The term 'double taxation' inherently connotes unfairness, since it implies an obligation at a level beyond the 'true' obligation. I think is why people are opposing you. However, you have acknowledged that sales taxes are 'double taxation' (or perhaps 'multiple taxation' in general) and you are not arguing that 'double taxation' is inherently bad. Further, saying that 'the same income is being taxed twice' depends on one's definition of 'income'.

I think we all accept that 'taxes on money changing hands' exist. The main thrust of this discussion is the argument over what is 'income'. You have described your view that a corporation is merely an abstract term for a group of people, and therefore money flowing from accounts in the name of a corporation to these people is not really 'income'. I don't intend to dispute this - I've had a different thought.

I may be misunderstanding a few things, but please consider the following.

When customers buy products from a grocery store, for example, those transactions pay sales tax. But if a bunch of regular customers signed a piece of paper making the grocery store an 'abstract entity denoting them as a group', then under your view, sales tax should not apply. In fact, hypothetically any number of citizens could effortlessly join up into any number of big legal entities. Then they could pay little or no sales tax, defeating the whole purpose of the tax. If that happened, there would need to be some kind of conceptual (and ultimately legal) distinction separating individuals from 'abstract group entities'. If you can accept such a conceptual distinction, then applying it to capital gains tax in the present world should only be natural.

Extending the analogy of sales tax: in a very real sense, a corporation provides a service to customers. Ordinary commercial services are covered by sales taxes (which are often called Goods and Services Taxes, e.g. in Australia). The people running a corporation are paid for the 'service' of handling the money of customers in a beneficial way. But in reverse, the corporation is paying the shareholders for the 'service' of providing capital. So investment can be interpreted as a strange kind of service - money flows 'both ways'. Even if returns did not fall under income tax, they could arguably be made to fall under a kind of 'special service tax' or an 'investment service tax'. This would be functionally equivalent to a capital gains tax.

I admit that a problem with this 'GST-based' view is that it implies the inflowing 'investment payments' should also be taxed. This can be handwaved by postulating that the government intentionally sets this tax to 0%, to encourage investment. It may even provide higher total tax revenue, due to the fact that investments are generally expected to grow.

Considering that the term 'double taxation' connotes unfairness to most people, and that ordinary sales taxes can apply to the same goods an arbitrary number of times, can you accept the interpretation that capital gains tax is really just 'a tax', rather than a 'double tax'?

[PainRack]

To be fair, since he clarified he does feel that sales tax is double taxation, the thrust of the argument has changed. I still don't feel its fair to claim that the income is double taxed, as it has had two oppurtinities for tax deduction on the grounds of the income being taxed on two seperate entities, hence, the "true" rate isn't Corporate+Capital gains.

[Magis]

Let's take a total reductio: the government sets corporation tax to 100%. Dividends reduce to zero. Liquidating the company would result in all its assets being taken in lieu of tax. You claim this has no effect on the tax rate paid by people who own shares in corporations. Do you agree?

Which is a capital gain unrelated to the actual economic gains a company had made.

???

The shares are priced according to the value of the company. If I form a holding company that has $1,000,000 in it and has no expenses, do you expect it to trade at less than $1,000,000? If so, I have some snake oil to sell you.

This actually does happen. One example is a TSX-listed company called Petrobank, which was trading lower than its net assets (it was even trading lower than its share of a subsidiary, which is also publicly traded!) Start-up mining stocks frequently trade at a value far less than the proven resources that they own and for which they have mining leases, even when including all costs related to extraction. It's also commonly seen in companies that are dual-listed on Canadian and American stock exchanges - the stock prices can vary by much more than the underlying currency exchange rate.

Stocks aren't "priced" according to value. The price of a stock is determined by the supply and demand of the shares at any moment. If you think that the price is always some rational quantity, then I have some snake oil to sell you.