Wednesday, January 25, 2012

The Short List - January 25, 2012

International
Domestic

63 comments:

Gels said...

This week's This American Life also deals with the European crisis. The Planet Money team reported for that episode of the podcast.

Colin said...

the rich should pay the same effective rate as everybody else

Given that everyone else faces an average/effective tax rate much lower than that of the rich, logically this means you believe the rich deserve a big tax cut.

Ben said...

I'm certain what Jason meant was that individuals with similar income pay similar tax rates regardless of whether their income is characterized as wage earnings or carried interest. Thus, Mitt Romney should pay at least as high an effective tax rate as individuals who earned $13 million in 2010 from wages. Horizontal equity would seem, on the whole, to be a good thing. It would also remove a distortion effect present in the current tax code, I imagine you would support such a move?

Colin said...

I am a long-standing supporter of tax reform. Regarding Mitt Romney, what people seem to be overlooking is that his income from those investments was already taxed once at the corporate rate of 35% before it was taxed yet again when it got to his hands.

With this in mind, I favor abolishing the corporate tax rate entirely and then taxing all forms of personal income at a single uniform rate rather than assigning different rates depending on how the income was earned.

Jason said...

You're conflating the corporation and the individual. The corporation, which benefits from civil society, a functioning legal system, roads, and an educated workforce is taxed because at an entity.

The individual, which enjoys all the same, is taxed for their individual income.

It's a worthwhile debate about the rate of corporate and individual taxes, but I'm sorry, a corporation paying taxes and an individual paying taxes doesn't mean Mitt Romney is double taxed.

Colin said...

Corporations are composed of individuals. When a corporation pays tax, what it means is that the individuals who comprise the corporation -- owners/shareholders (i.e. guys like Romney) and employees -- are those who actually pay the tax. Thus, if Romney is an investor, the money he invests is taxed once at the corporate rate and then again when it gets into his hands.

Jason said...

Corporations are independent entities vis a vis the state. As such they are taxed.

Presumably, in your paradigm, as Romney is an investor in Bain Capital, which is a collection of individuals, including Gov. Romney, then Gov. Romney would be individually legally responsible for any wrongdoing the company is convicted of?

Presumably, if Bain was sued and ordered to pay $5 billion in damages, but had only $4 billion on hand, then Gov. Romney the individual would be partially responsible for the difference and the plaintiff could sue Gov. Romney, the individual to recoup the difference, yes?

Colin said...

Corporations are independent entities vis a vis the state. As such they are taxed.

Yes, we know this and I have said nothing to the contrary. As I have pointed out, however, an investor's money gets taxed twice before it reaches his hand. The fact that investor and the corporation are two different legal entities does not change this essential fact.

Jason said...

Your statement is misleading precisely because an investor isn't responsible for losses beyond the corporations means to pay.

A corporation is taxed based on the revenue it makes. That revenue belongs to the corporation, not to a specific investor. If an investor puts $5 million into a company as stock and then decides to sell that stock, the investor isn't entitled to receive $5 million. So why then could you consider the taxes a corporation pay as a tax on the investor?

He or she puts money in at Point A and receives a return (or loss) at Point B. He or she doesn't have a claim on that money inbetween those two points. For that reason the taxes the corporation pays are not a tax on the individual.

The same way that investor isn't legally liable for a companies loss beyond his or her investment, so the taxes the corporation pays are taxes on the investment because that money is not the investors.

Colin said...

So why then could you consider the taxes a corporation pay as a tax on the investor?

Because the investor sees their return diminished by every dollar used to pay the corporate tax. Every dollar paid in tax by the corporation is one less dollar for Mitt Romney. Thus, ultimately he bears the burden of that tax. This is what tax incidence is all about.

Jason said...

Presumably the investor knows the corporate tax rate ahead of time and uses that information when calculating expected return on an investment. Corporate tax is the price of doing business so to speak.

To characterize the corporate as some additional tax, sprung on the investor is horribly misleading and insulting to the investor.

Colin said...

You're arguing with something I never said. I never characterized the corporate tax as unforeseen or a surprise or anything of the kind. Rather I pointed out that Romney and others like him are the de facto bearers of that tax burden, and the money they invest is taxed twice. Nothing you have written contradicts that.

Ben said...

Colin, your model only really applies if the corporation in question is a pass-through entity for its shareholders. You're really presuming that the corporation not only pays dividends (many do not), but that it pays out all revenue in excess of expenses as dividends. Given that most investors (at least equity investors) hold stock for its value on the secondary market and not for its dividend value, all of this seems rather beside the point. I'm unaware of any instance where a corporation's stock value was depressed by the tax rate to which it was subject. This is unsurprising given that all similarly situated corporations pay the same tax rate.

Jason said...

Everyone is a bearer of the corporate tax burden, from the investor, to the consumer, to the supplier, to the distributor. You attempted to eschew that investors get double taxed because of the corporate tax rate. It's misleading to frame the argument that way.

All share in the corporate tax burden, as all (though some more then others) share in the income tax burden. Thus your policy prescription seems a bit like moving the shells around.

Colin said...

The value of stock ultimately depends on profitability. Taxes reduce profitablility. Therefore an investor is still impacted by the corporate tax even if they only hold stock with an eye towards the asset appreciation.

Colin said...

You attempted to eschew that investors get double taxed because of the corporate tax rate.

I don't think that word means what you think it means. I didn't attempt to eschew that investors get double-taxed, it was in fact the point I was trying to drive home.

As for my policy prescripions, I think they would be far more efficient. I don't think I'm exactly the lone ranger on this front, as even many countries certainly not averse to high taxes, such as those in Scandinavia, have corporate taxes at least 7 percentage points lower than the US.

Ben said...

such as those in Scandinavia, have corporate taxes at least 7 percentage points lower than the US.

All of those countries have substantially higher capital gains taxes than the United States. I'm not sure whether they treat carried interest as capital gain or ordinary income but, even if they treat it as capital gain, then their rates go a long way to solving the Mitt Romney problem that animated this thread.

Colin said...

Actually, taxes do not reduce profitability -- they are calculated based on raw profit.

OK, imagine this thought experiement: a greedy oil company announces profits of $10 billion.

Now imagine it does so and the government then announces it will impose an $8 billion windfall profits tax.

Does the stock perform the same in both scenarios?

Colin said...

All of those countries have substantially higher capital gains taxes than the United States.

Exactly, they tax the income highest when it actually reaches the individual, which is exactly what I advocate.

Ben said...

OK, imagine this thought experiement: a greedy oil company announces profits of $10 billion.

Now imagine it does so and the government then announces it will impose an $8 billion windfall profits tax.


Come, now, Colin--no moving the goal posts. We're clearly talking about income tax and capital gains tax. We're talking about those taxes as they exist. Your hypothetical windfall tax, brought into this conversation from left field, should remain there.

Taxation as a punitive matter--which your hypothetical windfall would certainly be--is an altogether different subject, to say nothing of its questionable constitutionality.

Ben said...

Exactly, they tax the income highest when it actually reaches the individual, which is exactly what I advocate.

Actually, you've advocated for taxing income only when it is realized by an individual (a corporate rate of 0). This, by the way, is an odd locution--"when it reaches the individual"--it would suggest that you would tax the front end investment in the primary market. Certainly that's a bad idea because it would reduce capital liquidity and induce economic contraction.

Colin said...

Come, now, Colin--no moving the goal posts. We're clearly talking about income tax and capital gains tax. We're talking about those taxes as they exist. Your hypothetical windfall tax, brought into this conversation from left field, should remain there.

Wait, but you said taxes, not the corporate tax specifically, so I was in fact responding to what you wrote.

But no matter, let's just stick to the corporate tax. The value of a stock is usually related to the P/E ratio, with the P representing the net profit of the firm divided by the number of shares. Net profit is what the company is left with *after* taxes. Thus, the corporate tax directly impacts the share price.

Further, the more money is paid in corporate tax, the less money available to the company to fund acquisitions and other growth opportunities, which also depresses the stock price.

Either way, investors pay.

Colin said...

Actually, you've advocated for taxing income only when it is realized by an individual (a corporate rate of 0). This, by the way, is an odd locution--"when it reaches the individual"--it would suggest that you would tax the front end investment in the primary market. Certainly that's a bad idea because it would reduce capital liquidity and induce economic contraction.

I favor a corporate income tax of zero, with investors paying a uniform tax rate when the money from the investment actually reaches their hands, be it through capital gains, carried interest, or whatever. I have no idea why you think this would reduce capital liquidity.

Ben said...

I favor a corporate income tax of zero, with investors paying a uniform tax rate when the money from the investment actually reaches their hands, be it through capital gains, carried interest, or whatever. I have no idea why you think this would reduce capital liquidity.

Actually, you said: "tax the income highest when it actually reaches the individual." Given corporate personhood, the only reasonable interpretation of this statement is that you tax when the corporation realizes the investment from the investor, as well as when the investor withdraws his investment in the corporation. This double taxation on available capital would seem to reduce the availability of capital as well as the desirability of equity (as opposed to debt) based investment.

I gather you only want to tax living beings rather than persons or individuals; if that's the case, you should say "only tax living beings."

By the way, are you familiar with the realization doctrine?

Ben said...

P is price not profit. Price as in current share price.

E is earnings and does account for taxes. But, again, because all similarly situated corporations pay the same corporate tax rate, the dampening effect of the tax rate on E is the same relative effect between corporations.


Also, don't investors seek high P/E numbers?

Jason said...

Either way, investors pay

By the same logic, so do consumers and employees. Why single out investors?

And it follows, as they all pay, they all benefit. They benefit from roads, schools, and a legal framework that brings some modicum of fairness and safety to do business.

Colin said...

Actually, you said: "tax the income highest when it actually reaches the individual." Given corporate personhood, the only reasonable interpretation of this statement is that you tax when the corporation realizes the investment from the investor, as well as when the investor withdraws his investment in the corporation. This double taxation on available capital would seem to reduce the availability of capital as well as the desirability of equity (as opposed to debt) based investment.

I think in the context of what I was saying it was pretty obvious I meant when the money reached the individual investor.

Colin said...

P is price not profit. Price as in current share price.

You are correct. Brain fart by me.

E is earnings and does account for taxes. But, again, because all similarly situated corporations pay the same corporate tax rate, the dampening effect of the tax rate on E is the same relative effect between corporations.

Irrelevant. It still remains the case that it depresses the share value. Investors don't buy stock because of relative performance, but absolute performance.

Also, don't investors seek high P/E numbers?

No, it probably means the stock is overvalued.

Colin said...

By the same logic, so do consumers and employees. Why single out investors?

You're right, consumers do share in the corporate tax burden when they purchase products. The difference, however, is that they can make the choice whether or not to purchase the product and can thus avoid the tax by forgoing the puchase (or can purchase the product from a company overseas that has a lower corporate tax). Investors and employees, however, bear the burden of the corporate tax before the money ever gets into their hands.

And it follows, as they all pay, they all benefit. They benefit from roads, schools, and a legal framework that brings some modicum of fairness and safety to do business.

Corporations don't benefit -- the individuals who comprise the corporations benefit. And under a system of zero corporate taxation they would still pay taxes to support things like infrastructure and a legal system.

Jason said...

An investor could, by the same logic, invest in a company abroad that has a lower corporate tax, correct? Why do you keep flogging that corporate taxes are somehow especially unfair to investors, despite the fact that the rate of those taxes are known when an investor decides to invest?

Corporations don't benefit from roads? Corporations don't benefit from a legal structure that enforces contracts? I'm sorry, but that's ridiculous. Corporations are collections of individuals to be sure, but as we've already discussed they hold a separate legal identity in the eyes of the state and the eyes of the law.

Ben said...

I think in the context of what I was saying it was pretty obvious I meant when the money reached the individual investor.

Wasn't obvious to me, hence the comment on capital liquidity.

Irrelevant. It still remains the case that it depresses the share value. Investors don't buy stock because of relative performance, but absolute performance.

This is at best circular. P/E, based on share prices, impacts share price so the tax rate depresses share price (something you assert but do not demonstrate), impacts P/E, therefore impacting share prices. From this you conclude share price is depressed. I've seen no evidence of this.

Moreover, it's eminently relevant. Investors choose investments from a universe of possible investments; if that investor is choosing among corporations, the fact that they're all taxed the same and bear the same relative burden as their competitors, means that corporate tax policy will not impact investors choosing among corporations.

It may affect their decision-making with regard to choosing between shares and commodities, for example. But there are so many factors that influence whether one buys commodities or shares to reduce this to simply a question of the corporate tax rate strikes me as laughable.

Ben said...

Corporations don't benefit -- the individuals who comprise the corporations benefit. And under a system of zero corporate taxation they would still pay taxes to support things like infrastructure and a legal system.

If this were true, the corporate form would not exist. Corporations benefit because the individual investors, shielded from creditors and from tort liability by the corporate form, are willing to provide corporations with capital, which in turn allows the corporation to operate. Otherwise, there would be no reason to operate as anything other than a partnership, where capital, liability, management, and ownership are all bound-up.

Colin said...

An investor could, by the same logic, invest in a company abroad that has a lower corporate tax, correct? Why do you keep flogging that corporate taxes are somehow especially unfair to investors, despite the fact that the rate of those taxes are known when an investor decides to invest?

You are again arguing with something I never said. I never said the corporate tax was unfair. Rather I said it was an overlooked aspect of Romney's taxation that should be taken into account. That's how this whole debate started.

Corporations don't benefit from roads? Corporations don't benefit from a legal structure that enforces contracts? I'm sorry, but that's ridiculous. Corporations are collections of individuals to be sure, but as we've already discussed they hold a separate legal identity in the eyes of the state and the eyes of the law.

The fact that a corporation has a separate legal standing is irrelevant. A corporation, yet again, is nothing more than a collection of individuals. The individuals that comprise the corporation, both employees and investors, benefit from the roads, legal protections, etc. This is nto ridiculous, it is observable reality. Minus the people that comprise it, a corporation is just a stack of papers.

Jason said...

[corporate taxes] was an overlooked aspect of Romney's taxation that should be taken into account

Do you take that into account with every consumer that buys a product? With every customer that paid for services rendered to Bain? You comment is like saying, "We should take into account that taxes exist." We know they exist, and an investor like Gov. Romney knows they exist when he chooses to invest.

By implication, your comment says Romney is paying more in taxes then the calculated effective rate of 13.9%. So is EVERYONE else in some degree or another. Why is this worth noting? How does noting that corporate taxation exists impact the original point that horizontal equity is a good thing?

The fact that a corporation has a separate legal standing is irrelevant.

I assure you that fact is not irrelevant to an investor like Gov. Romney who is only financial liable for his initial investment and not for any debts the company racks up after that initial investments.

Ben said...

The fact that a corporation has a separate legal standing is irrelevant. A corporation, yet again, is nothing more than a collection of individuals.

This is not true. The separate legal standing is incredibly relevant. A collection of individuals is merely an unincorporated association. In such a collection each individual is liable for the mistakes of the whole (both in terms of tort and in terms of credit). In a corporation, the individuals--all of the individuals--are shielded from this. Moreover, becomes the corporation has separate legal personality, criminal conduct is also in some cases shielded. This is a huge consequence and one that gives a corporation an incredible advantage over nearly any other amalgamation of individuals.

Colin said...

This is at best circular. P/E, based on share prices, impacts share price so the tax rate depresses share price (something you assert but do not demonstrate), impacts P/E, therefore impacting share prices. From this you conclude share price is depressed. I've seen no evidence of this.

I have asserted that the value of shares are based on earnings. Earnings are depressed due to taxes. Therefor the share price is impacted by taxes. This is not difficult at all. The evidence is that profitable firms do well in the stock market and unprofitable ones do not.

Moreover, it's eminently relevant. Investors choose investments from a universe of possible investments; if that investor is choosing among corporations, the fact that they're all taxed the same and bear the same relative burden as their competitors, means that corporate tax policy will not impact investors choosing among corporations.

If a stock market is comprised of 10 companies, and they are all doing poorly, investors will not simply crowd into the least poorly performing one. They will either park their money in the bank, or an alternative investment vehicle. Conversely, if all 10 are doing well, investors will not only invest in the one that is doing best.

But there are so many factors that influence whether one buys commodities or shares to reduce this to simply a question of the corporate tax rate strikes me as laughable.

You're arguing with something I never said. I never said anything was simply a product of the corporate tax rate. Rather I said, and maintain, that the tax rate impacts firm profitability and thus share price.

Colin said...

This is not true. The separate legal standing is incredibly relevant. A collection of individuals is merely an unincorporated association. In such a collection each individual is liable for the mistakes of the whole (both in terms of tort and in terms of credit). In a corporation, the individuals--all of the individuals--are shielded from this. Moreover, becomes the corporation has separate legal personality, criminal conduct is also in some cases shielded. This is a huge consequence and one that gives a corporation an incredible advantage over nearly any other amalgamation of individuals.

Fine, but also irrelevant within the context of this discussion. None of this changes the fact that the activities of corporations ultimately benefit individuals.

Jason said...

the activities of corporations ultimately benefit individuals.

I would add the caveat that the activities of corporations ultimately benefit *some* individuals. I would also add that *some* government action ultimately benefits corporations.

Colin said...

Do you take that into account with every consumer that buys a product? With every customer that paid for services rendered to Bain? You comment is like saying, "We should take into account that taxes exist." We know they exist, and an investor like Gov. Romney knows they exist when he chooses to invest.

By implication, your comment says Romney is paying more in taxes then the calculated effective rate of 13.9%. So is EVERYONE else in some degree or another. Why is this worth noting? How does noting that corporate taxation exists impact the original point that horizontal equity is a good thing?


It's worth noting that the money Mitt Romney invested was taxed twice before it reached his hands. Since we are, after all, talking about income taxes this seems incredibly relevant.

I assure you that fact is not irrelevant to an investor like Gov. Romney who is only financial liable for his initial investment and not for any debts the company racks up after that initial investments.

Yes, but for the purposes of assessing Romney's income tax burden it is irrelevant.

Colin said...

I would add the caveat that the activities of corporations ultimately benefit *some* individuals. I would also add that *some* government action ultimately benefits corporations.

Whoever said otherwise?

Jason said...

Who said otherwise?
You did: "Corporations don't benefit -- the individuals who comprise the corporations benefit."

Again, Mitt Romney is not taxed twice anymore then a consumer is taxed twice by a corporate tax and a sales tax or an employee by a corporate tax and an income tax. You have not explained the distinction between these different scenarios that would necessitate noting that the taxes Romney pays are an exceptional case.

Colin said...

You did: "Corporations don't benefit -- the individuals who comprise the corporations benefit."

And that's true. But I didn't say anything about the distribution of benefits among the individuals.

Again, Mitt Romney is not taxed twice anymore then a consumer is taxed twice by a corporate tax and a sales tax or an employee by a corporate tax and an income tax. You have not explained the distinction between these different scenarios that would necessitate noting that the taxes Romney pays are an exceptional case.

In the context of income taxes, which is what we are discussing -- this all began with talk about Romney income tax rate -- it is worth remembering that his income was taxed twice before it got to him. This is not true for a consumer making a purchase.

Jason said...

worth remembering that his income was taxed twice before it got to him. This is not true for a consumer making a purchase.

I'm sorry, but you're just restating the same failed argument. His *income* is not taxed twice in any way different then any other consumer's income is taxed twice.

A consumer makes an income, that income is taxed. The consumer takes his or her post-tax income and buys a television. Some component of the price of that television includes accounting for the taxes the manufacturer of that television will have to pay.

Meanwhile, an investor makes an income and that income is taxed. That investor takes his or her post-tax income and decides to buy X number of shares of stock in the television manufacturer. Just like the consumer, the valuation of the stock takes into account that the television manufacturer will have to pay taxes.

How is an investor's case exceptional as compared to any other consumer? Unless you can make a compelling argument about the differences here, there's no reason to pay any mind to your original statement.

Colin said...

We're talking about *income* taxes and Mitt Romney's income tax. Therefore it is worth bearing in mind that Romney's income already took a tax hit *before* he even got it (after which time it took yet another tax hit through his personal income tax). Because his income is reduced due to this corporate tax it is worth noting this as part of the income tax burden he has.

In contrast, when a consumer makes a purchase it isn't their income that is taxed. Money sitting in the bank that is then used for a purchase is not income.

There's your difference.

Jason said...

His income isn't reduced by corporate taxes any differently then his income would be reduced by the cost of keeping the lights on at a factory. This is a cost. A cost who's absolute value is subject to change based on profits, but who's relative value is static and known.

You want to get hung up on that cost being in the form of a tax, that's fine. But it remains disingenuous to suggest Romney was double taxed.

Colin said...

But it remains disingenuous to suggest Romney was double taxed.

Disingenuous? It's literally the definition of double taxing.

Jason said...

The definition of investopedia? Forgive my skepticism.

Ben said...

Double taxation refers to the income stream, not the individual. Romney was not subject to double taxation -- Romney was taxed exactly once for his income. The funds that accrued to Bain, before _some_ of which were paid out to employees as wages, were also subject to tax at the corporate tax rate, so long as they were income.

Have any of actually read Romney's returns to determine where these 2010 capital gains came from? I haven't. It may well be that his 2010 earnings are the product of funds managed on behalf of Romney (and others) by Bain, in which case they wouldn't have even been taxed at the corporate rate.

Colin said...
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Colin said...

And
here it is again. Strange that multiple sources provide a definition for something that you seem to believe doesn't exist.

Colin said...

Double taxation refers to the income stream, not the individual.

Yes, the investor's income stream is double taxed. Therefore the investor is the de facto bearer of the tax burden.

Ben said...

Yes, the investor's income stream is double taxed. Therefore the investor is the de facto bearer of the tax burden.

Uhmm no? What do you mean by investor here. Double taxation refers to the fact that the corporation is taxed on income (from sales, for example) and then the corporation's wage earners are also taxed on those wages.

It does not refer to taxing the purchase and sale of equity on the primary market and the secondary markets by investors. The only taxes to the investor in that situation are when he realizes gain from the disposition of property (shares). This is the realization doctrine.

Ben said...

Also, not for nothing, but double taxation is really a canard. There is no difference in (1) taxing a corporation for the income it earns as an entity--and a separate legal entity it is--then taxing the corporation employees for their income; and (2) me earning an income as a separate legal entity (which I am) and being taxed on that income, then my hiring a third party for a job, paying that third party, and that third party being taxed on that income.

Colin said...

Uhmm no? What do you mean by investor here. Double taxation refers to the fact that the corporation is taxed on income (from sales, for example) and then the corporation's wage earners are also taxed on those wages.

Investor refers to the Mitt Romney-type. Double taxation does not only apply to wage earners. Corporate taxes along with taxes on distributions from the company to the investor counts as double taxation.

Colin said...

Also, not for nothing, but double taxation is really a canard. There is no difference in (1) taxing a corporation for the income it earns as an entity--and a separate legal entity it is--then taxing the corporation employees for their income; and (2) me earning an income as a separate legal entity (which I am) and being taxed on that income, then my hiring a third party for a job, paying that third party, and that third party being taxed on that income.

I thought this whole discussion was about investor/Mitt Romney types, not wage earners.

Jason said...

Your original comment that "Regarding Mitt Romney, what people seem to be overlooking is that his income from those investments was already taxed once at the corporate rate of 35% before it was taxed yet again when it got to his hands," implies that Gov. Romney is some how a special case and those that would criticize for his effective tax rate are wrong to do so.

I think it's been pretty clearly proven his is not a unique case and people can still be rather put off by the lack of horizontal equity.

Colin said...

Perhaps this
will clarify the concept of double taxation. If not, I'm at my wit's end:

Imagine that you are self-employed. Every year, you earn $100,000, pay 35% in taxes and have $65,000 left in your pocket. Now you form a corporation. $100,000 goes into the corporation. There is a corporate tax rate of 25%, so that leaves $75,000 which you pay to yourself as a dividend which are taxed at 15% which leaves you roughly $65,000. So sure, you could say that your tax rate was 15%, but that would be nonsensical.

The point being: the income tax burden of an investor such as Mitt Romney goes beyond simply the final rate they are taxed at. It's an incomplete picture.

Colin said...
This comment has been removed by the author.
Colin said...

Your original comment that "Regarding Mitt Romney, what people seem to be overlooking is that his income from those investments was already taxed once at the corporate rate of 35% before it was taxed yet again when it got to his hands," implies that Gov. Romney is some how a special case and those that would criticize for his effective tax rate are wrong to do so.

I have no idea how you got from what I wrote that Mitt Romney was a special case. I thought Mitt Romney, raised by Ben, was being discussed as representative of a broader phenom within the tax code.

Ben said...

So sure, you could say that your tax rate was 15%, but that would be nonsensical.

If by nonsensical you mean accurate. The corporation is an entity separate from yourself. It, not you, is taxed at 25%. You are taxed at 15%. Conflating yourself and the corporation completely ignores the purpose of the corporate form--you would never go through this process were it not for the fact that by assuming the corporate form you've insulated yourself from both creditors and tort liability.

Also, it's worth noting that the 35% tax rate is a marginal tax rate, so the math in this example isn't even correct.

Ben said...

But all of this has gone rather far afield. The real point is that one who earns an income through managing funds, as Mitt Romney did at Bain, and as many hedgefund managers do, should not be allowed to escape normal income tax by virtue of the carried interest exception.

Colin said...

If by nonsensical you mean accurate.

If you truly believe this, then really there is nothing more for me to say.

Ben said...

If you truly believe this, then really there is nothing more for me to say.

It's not a matter of belief but of fact and law. I have merely--and several times over--pointed out that a corporation and its individual managers, employees, and owners (shareholders) are separate persons. They have separate rights and responsibilities--including separate tax liabilities.