Path: utzoo!attcan!utgpu!watmath!watdragon!jmsellens
From: jmsellens@watdragon.waterloo.edu (John M. Sellens)
Newsgroups: can.general
Subject: Re: Flat-Rate Tax
Message-ID: <16148@watdragon.waterloo.edu>
Date: 27 Aug 89 07:01:40 GMT
References: <1989Aug24.150811.14764@gpu.utcs.utoronto.ca> <16123@watdragon.waterloo.edu> <1989Aug26.214344.24140@utzoo.uucp>
Reply-To: jmsellens@watdragon.waterloo.edu (John M. Sellens)
Organization: U. of Waterloo, Ontario
Lines: 47

In article <1989Aug26.214344.24140@utzoo.uucp> henry@utzoo.uucp (Henry Spencer) writes:
>In article <16123@watdragon.waterloo.edu> jmsellens@watdragon.waterloo.edu (John M. Sellens) writes:
>>>Ideally, business
>>>income should be untaxed.  You can tax business income by
>>>taxing the dividend and capital gains incomes of individuals.
>>
>>So that someone earning a lot of money in a business can just leave
>>it there earning more money and delay paying any taxes for as long
>>as he likes.  Make the poor pay! :-)
>
>Yup.  Clearly, creating jobs and investing in our economy is evil and
>should be discouraged by taxing it.  Or rather, by taxing people who
>are *successful* at it and therefore make money.

I was referring more to the situation of making a bunch of money in a
business and putting it in the bank.  Should you get the benfit of
delaying paying tax, just because the business owns the money sitting
in the bank?

And then what is meant by "in a business"?  If the business entity is
a corporation, it is (currently) treated as a separate entity.  If the
business is unincorporated, then it is treated as a part of the owner.
If a business is unincorporated, there are no dividends or capital gains
in the ordinary course of things.  How do you (re-) define the point
where non-taxable income comes out of the business to become taxable
income of an individual?  Do you distinguish between incorporated and
unincorporated businesses for tax purposes?  If so, why?  Why should
the form a business takes affect how much and when tax is paid?  Why
should there be a tax incentive to leave money lying dormat owned by
a business rather than lying dormant owned by an individual.  The money
would have the same effect on the economy and jobs no matter who owned
it.

Saying "business income should be untaxed" is fine - but stating it just like
that ignores the fact that there are many facets to all this, and that
once you investigate it, it seems (to me at least) that things become
a little less clear, and the dividing line a little harder to find.

The current tax system attempts to be integrated e.g. you sell something
and make a profit and eventually some money ends up in your pocket.  The
tax system tries to make sure that the end result is the same (i.e. the
overall tax rate is the same) no matter what *form* the transaction takes.
It tries to tax based on the *substance* of the transaction, rather than
the (possibly contrived) *form* it happens to take.

John M. Sellens, C.A.
(i.e. Yes - I have some knowledge of the tax system and its principles)