I don't know that I agree with the fairness points you raised, but from a sensibility standpoint, I like the idea. Corporate income tax is only 9% of total federal receipts, so it seems like we could make that up without incredibly burdensome changes. It would also make the US competitive again as a corporate domicile for multi-nationals (though without taxing them, it's not clear how advantageous that would be).
I do worry that it would raise other forms of exploitation of loopholes though. There would be less pressure to report payroll expenses (decreasing compliance and decreasing payroll taxes as anyone you pay off the books is cheaper out of pocket for you per dollar they receive) and I suspect we'd see a lot more people not taking large salaries at companies they control but rather funding their lifestyle needs with perks and loans from the company, the repayment of which would not be taxed.
Payroll taxes are 1/3 of federal receipts; any significant decrease in compliance there would perhaps be more damaging than losing the corporate tax income directly.
Yes, I think there is an enforcement and compliance problem. I think that gets into some serious details about a plan that would actually work. Perhaps extremely steep penalties for anyone caught cheating would be enough, but you are right that people would try to hide their revenue in the corporation. But aren't the extremely rich already doing that?
I do worry that it would raise other forms of exploitation of loopholes though. There would be less pressure to report payroll expenses (decreasing compliance and decreasing payroll taxes as anyone you pay off the books is cheaper out of pocket for you per dollar they receive) and I suspect we'd see a lot more people not taking large salaries at companies they control but rather funding their lifestyle needs with perks and loans from the company, the repayment of which would not be taxed.
Payroll taxes are 1/3 of federal receipts; any significant decrease in compliance there would perhaps be more damaging than losing the corporate tax income directly.