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Can someone explain why companies should pay taxes at all? Their shareholders should and they do pay taxes according to their income but what's the purpose of an extra taxation to a legal entity?



When the corporate tax rate is low, people have a large incentive to create corporations to shelter their income. This already happens now quite a bit given corporate deductions and the low tax rates on dividends, but if you got rid of corporate taxes altogether, you'd just increase the amount of money that stayed within those little corporations, thus decreasing the total overall tax revenue.

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If the money stays in the company forever, why should they be taxed? Imagine a company that makes billions but never distributes income in any form, a 90% shareholder could starve to death. Income should be taxed only when distributed, it's like it doesn't exist if it's not.

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