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Comment by AlexTWithBeard | Hacker News Reader

Sounds very reasonable. I'm sure there's a catch, but I don't see where it is.

Taxing a business looks like a weird thing to do: a business can only spend money on business-related stuff pretty much by definition.

In order for money to be spent on non-busines things, it should be paid out as a salary, dividends or something like that which we know how to tax pretty well.

I'm certainly missing something, but what?

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Not an economist so I don't know the official reason. But a corporation can theoretically accumulate profits indefinitely without making a payout, while governments need stable yearly revenue.

Maybe more material from a public policy point of view is that we like to tax different things at different rates, to favor or disfavor spending on various things. Hard to tax a salary based on what the employer spent their money on.

A corporation could accumulate although I expect shareholders would stop that fairly quickly.

You could still implement Pigovian taxes such as fuel or alcohol duties.

There's many valid reasons for accumulating profits, such as planning buyouts or expansions. That being said, sometimes it can be done for reasons such as waiting for a preferable tax regime. Due to that, some countries have a separate accumulated earnings tax that is similar to individual wealth taxes to disincentivize accumulating without a business purpose.

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