A robber
waylays a merchant on his way back from a trading expedition, seeking to
relieve him of some of his profits. The merchant, if he is smart, hires a
bodyguard to defend him against the attempted predation of the robber. The
robber says: “Cease defending yourself! I rob you so that I might give to the
poor!” The merchant responds: “I care not what you do with your loot. You shall
not take from me against my will. If you must, take your spoils from a less well-prepared
merchant, but from me you’ll have none.”
A government
sees a corporation that has just made a profit, and seeks to relieve it of some
of its profits by way of a corporate income tax levy. The corporation, if its
directors are smart, hires a tax lawyer to defend it against the attempted coerced
levy of the government, the lawyer advising the corporation on how to employ
every legal means available to pay a smaller amount. The government says:
“Cease trying to avail yourself of tricky tax loopholes! We tax you so that we
might give to the poor!” The corporation’s directors respond: “We care not what
you do with your taxation money. We will not allow you to take a penny more
than is strictly necessary for us to stay within the bounds of the law. If you
must, take your taxation money from a less well-prepared corporation, but from
us you’ll have as little as possible.”
Thus, the
tax lawyer is a kind of modern bodyguard to corporations. Like the bodyguard,
the tax lawyer performs the valuable service of protecting some of their
clients’ assets against being taken away from them against their clients’ will.
Besides
being valuable to the client, the corporate tax lawyer is also valuable to
society at large. The corporate income tax is a particularly destructive form
of taxation. Without it, corporations would have more of a welcome incentive to
retain more of their profits in the form of Retained Earnings, using these
Retained Earnings either to invest in their own business or in other businesses
within the economy. The corporate income tax is a levy standing in between
Profits and Investment. Without it, profits could be channelled
tax-free into investment, and more investment would occur as a result,
something that would make the economic system more productive generally and
which would enable it to implement technological advances more readily.
In addition,
the corporate income tax is a form of double-taxation when shareholders are
paid dividends. Not only must their corporation’s profits be cut by the tax
before any distribution can take place, thus leaving less to distribute and to
invest in the future, but then they must pay an additional amount in personal
income tax when they receive their dividends. These dividends represent the
reward, akin to an interest payment, for the shareholders’ saving and
contribution to productive investment in the economy. With this reward twice
diluted, the incentive to save and contribute to productive investment is
weakened, and the productivity of the economy suffers as a result.
Given these
harmful effects, whenever a tax lawyer succeeds in enabling a corporation to
pay less of this ill-advised tax, they are thereby alleviating some of the
negative effects of the tax, to the benefit of all of the society.
Thus, not
only are tax lawyers valuable personal bodyguards to corporations, but they are
also heroic defenders of society against ill-advised governmental fiscal policies. This
is not to say that all taxation is ill-advised and should be abandoned
forthwith. But certain types of taxation, such as the corporate income tax and the capital gains tax should probably be completely abolished, while other types
such as the personal income tax and sales tax should probably be radically
simplified, greatly reduced in magnitude, and be made more uniform for all
citizens. If this were to happen, tax lawyers might need to find a new line of
work, but until that time, I would consider them to be social heroes, even if
they do not consider themselves as such.
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