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This came up in a pub discussion. (yes, it was good beer...)

Suppose that instead of taxing companies on the net income they make, they were taxed at a much lower rate on cash flow, with no deductions for anything at all.

It would play hell with the financials market because every stock and bond transaction will be nibbled, so there would enormous pressure to buy and hold, compared to quick turn around.

It would affect mass market goods more than services. Mass markets tend to run on fairly low margins, compared to services.

The lack of any deductions would be interesting. Not sure what effect that would have.

It would be very simple, so a whole bunch of very smart people who have been working hard to keep a nickel out of the government's pocket could devote their talents to something else.

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    $\begingroup$ I have not read this, but it (or the referenced papers) might have an answer to your question - eml.berkeley.edu/~burch/cashflow.pdf $\endgroup$ – Pawel Kam Nov 28 '17 at 23:39
  • $\begingroup$ I made it to page 4 before my eyes crossed. $\endgroup$ – Sherwood Botsford Nov 29 '17 at 16:30

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