Some companies need to reinvest a lot and some don’t. Thus the creation of tax-favored vehicles like REITs and MLPs. A high percentage of taxable income must be paid out, but it is not taxed at the corporate level.
With REITs and MLPs, they don’t need to reinvest much, so the structures work most of the time. But what if we changed corporate tax policy to mimic REITs and MLPs? Maybe end corporate income taxation, but require corporations to pay out what they don’t reinvest. They all become pass-through vehicles, but some with delay due to reinvestment. That would give growth companies a small advantage. Personal tax rates would likely have to rise, unless we are willing to cut federal spending.
Note that this would move tax policy for public companies closer to that of private equity. It’s not the same thing, but delaying taxation on reinvestment would promote growth. If we have to balance this out, a small rise in personal tax rates would do it, and more rise for the rich.
Personally, I would prefer a simpler system where everything gets taxed the same way, but this might not be a bad approximation of a good system. If the tax system is rigged to pass through income for free at the corporate level for some vehicles, then delaying taxation on reinvestment is not a horrible idea. After all, we do the same with IRAs of all sorts, where nothing is taxed until the assets are used for consumption.