Monday, September 13, 2010

[tjgqeyqg] Corporate income tax and litigious society

We have a very litigious society.  Once you are rich, everyone wants to sue you.

We have a corporate income tax, which is double taxation on the same income.

Both of these are considered bad things, inhibiting and harming the economy, but here is an alternative viewpoint.

Perfect market competition drives economic profits to zero.  Therefore, if you are making economic profits, gettin' rich, you must be exploiting some kind of market failure.  Some of these market failures, particularly involving monopoly profits and anti-trust, seem incredibly difficult to prosecute, sometimes ultimately because those who have money can write the law to maintain profits.

The two mechanisms broadly serve to recompense society for the harm caused by the market failure.  Perhaps they even help induce correct behavior, though I'm less sure about that.

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