Gold has its niche applications where you need a malleable and nonreactive metal (like dentistry). If this was the only use for gold, it would still be at least 800-900USD an ounce, because it that’s what it costs to extract.
The market cap for gold would be like 1 billion USD, rather than 11 trillion USD.
Ironically in a world where gold wasn’t ‘lusted’ after, it might even be more expensive because the market would be illiquid. And a small oligopoly of suppliers would be able to gouge buyers.
This is what happens in the rare earth metals market.
A company doesn’t “keep” anything. It eventually uses all of its money to either pay dividends (or stock buybacks, their financial equivalent), salaries, business expenses.
We tax corporate profits, not income. That takes out of the dividend stream, so we tax capital gains (the tax the investors pay on dividends/stock appreciation) correspondingly lower.
You could in theory get rid of the corporate tax and just tax capital gains at the same rate as income. It would fix a lot of problems. But you would upset a lot of people who don’t understand finance and taxation, like the people seeing red in this thread, who have some moral gripe with these corporations (who are mostly just doing what the law incentivized them to).
It would have one small effect though. Since the US taxes the worldwide income of its citizens and permanent residents, it would probably overtax them, making them pay the higher capital gains rate for profits made in countries that do retain the corporate tax. The most obvious ways to fix that would just reintroduce the problem of sorting out where the profit was “made”, which is where we are now. Ideally, you’d get all of the western countries to sign up to end this stupid corporate tax at the same time. That’s difficult because a few important countries have used low corporate tax rates as a way to attract business that would otherwise have no reason to be there.
The problem you do not address, which is already big and would become huge if corporate tax is abolished, is the deferral aspect:
All companies will hoard all cash waiting (perhaps decades) until the tax rates are lower, and then pay it out as salaries/dividends with a lower rate; it’s already happening with overseas profit and “tax holiday” years, but so far only Apple/Google size companies can participate.
Once you enable this for domestic companies, every employee making >$80K will incorporate, keep money in company and draw minimal salary actually needed for everyday life, waiting for favorable tax day or needing the money. The tax base would be reduced by 10-50% if not more (due to progressive taxation) and though it may even out in the end, it would make tax receipts unpredictable and likely somewhat lower overall.
I don’t see the issue with corporate taxation - it’s a liability shield, and it has a cost. Those who don’t like it can do a tax pass-through and risk the liability. Almost no one wants to do that.
> A company doesn’t “keep” anything. It eventually uses all of its money to either pay dividends (or stock buybacks, their financial equivalent), salaries, business expenses.
Companies certainly do keep cash balances. That cash balance directly adds to the company’s valuation. They’re not obligated to pay it out or spend it. The owners of the company can sell the company, including cash balance, as an asset.
Suggesting that a company’s cash balance somehow doesn’t count because it’s inside a company structure is disingenuous.
You’re just quibbling about how much the total taxation should be. The point is that it doesn’t matter if you tax the company profits at 20% and capital gains at 20% (assume the normal income tax is 40%) or if you tax the company 0% and tax capital gains at 40%.
The government already tries to reduce double taxation. There is not supposed to be a penalty for incorporating vs. doing business as a sole proprietor or general partnership. That’s why the capital gains tax is lower than the income tax.
This is all about ease of administration and making creative accounting more difficult or impossible. If you’re looking at it through some moral lens, you don’t get it.
It does matter if you tax the company profits at 20% and capital gains at 20% (assume the normal income tax is 40%) or if you tax the company 0% and tax capital gains at 40% - because there's a substantial timing difference. You have to pay the corporate income tax this year; you can generally defer the capital gains tax for arbitrary amount of time with some structuring to avoid any taxable event; there's some overhead involved so it's not for small amounts of capital gain, and you need control over the corporate structure, you can't do it for capital gains on 0.001% or Apple; however, if you'd have 0% tax on company profits and capital gains at 40%, then all the billionaires would be paying essentially zero taxes.
Historic precedence doesn’t exist... till it does.
No one wants to carry around chickens to trade.
The value of a monetary asset is in its interoperability, and backers of Bitcoin are working to enable that to a high degree.