Negative Income Tax

Out of curiosity, what would happen then with publicly traded companies? There's potentially millions of shareholders.

Let's say Nortel loses $5billion in a year, that loss would end up getting distributed to all the shareholders. So, everyone gets a bit of a loss to use against their income. That sounds fine when everyone only has a few shares, but what happens if I own a 20% share of a company that size? I'm potentially one of the most wealthy people in Canada, but because the company i owned lost huge money, I might end up with a -$1mil income, meaning I'd get a huge refund, even though the original idea of the system was to help the little guy, it's now helping the big guy, and on a strict dollar basis is helping them to huge effect.

On a similar note, suppose that I'm a shareholder who owns some shares in a company that ends up having an awesome year and ends up with huge EPS. It could mean that I might end up with hundreds of thousands of dollars of income in a year, but since there's no cash distribution down from the corp to me, how would I pay the tax on it?

In the first situation I would say that corporate losses stop at zero though if you end up in poverty as the result of a loss you should receive a payment, so it’s hard to say. As to a jump in income, a flat tax would greatly reduce tax as you would not have tax brackets, but better still would be to place a cap on income tax above which people pay a flat rate.

Sorry no my mistake, shareholdes wouldn't pay corperate tax that tax wouldn't exist. there wouldn't be capital gains exemption so tax would be paid when stocks are sold.

Dividends are paid quarterly from the profits, this is income and tacxed as such. When stocks are purchased, that amoutn can not be deducted, so a capital gains exemption of $250 000.oo is placed on assets such as stocks or land.

True so the value of the stock would go up incresing personal income tax, also tax demand would drop as programs would be streamlined.