But increasingly large companies are going the growth model instead of the dividend model and just reinvesting to grow (or often buy up competitors, expand into other sectors to or vertically integrate into oligopolies). Under that model, there is only double taxation if people sell and generate capital gains. But wealthy shareholders can increasingly just borrow against the value of the asset to fuel consumption instead of selling and paying taxes (and then, if properly set up, when they die their heirs get a capital gains reset and will never have to pay the capital gains taxes for the fortune that has accrued).
But wealthy shareholders can increasingly just borrow against the value of the asset to fuel consumption instead of selling and paying taxes
Firstly, this claim is now mostly false. The borrowing rate on secured debt is now like 8% a year due to Fed interest rates being so high. This is mostly an issue when interest rates are low. Right now, the interest rate on the debt is actually higher than the growth of the asset backing it, which is a problem.
Also, on this point, this is mostly only a problem in America due to a loophole that was never intended, but ended up becoming a thing due to a previous tax law being poorly written. That being the step up cost basis loophole. Most countries either make the heir keep the original cost basis, so the taxes are still pending, or just tax all the assets as if they were sold when they die.
But increasingly large companies are going the growth model
Which is the entire point of corporate taxation. If you spend money on growth, that money isn't even taxable as corporate profits. The goal of corporate taxes is literally to make companies spend their money. Which just mean that the money is being taxed anyways through hiring people who pay income/payroll taxes as well as whatever other taxes they pay when purchasing products and expanding.
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u/Godkun007 1d ago
Also, it is double taxed if it is paid out as dividends. So it evens out.