Reasonably Optimistic I'm not anti-tax. But this one should go.
Apr 10, 2026
A lively debate about whether the corporate income tax should be scrapped. Discussion of massive compliance costs and why defining business income is maddeningly tricky. Examination of deductions, debt rules, and political tax breaks that warp incentives. Bold proposals to tax people instead of corporations and the challenges of foreign capital and avoidance.
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Complex Taxes Distort Corporate Investment
- Complex corporate tax rules create incentives for firms to hire specialists to lower tax bills rather than invest in productive projects.
- That cottage industry of consultants, lawyers, and bankers shifts capital toward tax-advantaged activities not necessarily the most productive ones.
Business Income Is Harder To Define Than Personal Income
- Defining business income is intrinsically harder than personal income because firms must deduct necessary expenses to avoid penalizing capital- or low-margin businesses.
- Taxing gross receipts would cripple low-margin businesses like grocery stores and over-penalize capital-intensive firms such as aluminum smelters.
How Deductible Meals Became A Slush Fund
- Megan McArdle uses the example of deductible business meals to show how tax deductions became slush funds and encouraged routing personal pay through expense accounts.
- She notes the 1980s crackdown that reduced meal deductibility to 50% to curb that distortion.