My reason is the tag line “Two thirds of companies pay no taxes…” is what most people focus on yet, not knowing that (like what fletc3her mentioned above) S-Corp status pass the losses to the shareholder’s personal tax returns. It my personal belief that the GOP don’t truly support the small business owner. They don’t what us lowly engineers to be anything other than subservient button pushers. Otherwise, it would be MUCH easier to start a business and keep it going.

Here’s an example of how this works. Say your corporation pays four shareholders $50,000 a year salary (and may pay other non shareholders as well). If the corporation has $200,000 in the bank account at the end of the year then $50,000 of that “profit” is added to each shareholder’s individual return. Their income is reported at $100,000 for the year. This occurs even if the “profit” is not distributed to the shareholders. The tax is paid even if that money stays in the bank to cover the next year’s expenses or to help the corporation get past an economic downturn.

That money raises each of the shareholders from the 25% to the 28% tax rate so the corporate profits are effectively taxed at 28%. This is less than the 39% tax rate which a normal corporation would pay on that money. But, it still is most definitely not a case of the corporation dodging taxes.

The tendency to lump all corporations together creates the clearly mistaken impression that many or most corporations are actively working to avoid paying taxes which they are obligated to pay when, in many cases, there is no corporate tax obligation whatsoever.

There is widespread abuse of corporate taxation in all forms, including among S-corporations, limited liability and professional corporations. But, it is not helpful to the discussion to create the overarching impression that all corporations are engaged in tax avoidance when, in fact, this is not the case. All corporations, it turns out, are not created equal with regard to taxation.