Arguably the least distortionary thing you can do, if you must have taxes, is to disincentivize labor and profit by the same amount. Otherwise, you drive people to engaging in one sort of activity over the other.
Then given the difficulty in measuring taxable profit effectively, it sounds like you should be in favor of a consumption tax that doesn't distinguish the source of the money being used to make the purchase.
No, because consumption taxes don't reach profits that aren't spent on goods and services. They are massively regressive. It over-incentivizes "investing" money. There are three assumptions by economists in this regard that don't reflect reality: 1) the world is open, resources are unlimited, and growth is always possible; 2) that investment is always good; 3) distribution doesn't matter. None of those assumptions are true.
>No, because consumption taxes don't reach profits that aren't spent on goods and services.
Nothing lasts forever. Eventually the profits will either be spent or escheat to the state when the last heir to a fortune dies without any descendants. And you can't very well benefit from having money if you never spend it.
>They are massively regressive.
This is trivial to fix. Send everyone a check for a fixed amount every month as a "tax refund" and the effective tax rate of those with less money to spend drops or becomes negative.
>It over-incentivizes "investing" money.
All taxes are distortionary. If you tax income then you under-incentivize investment. Why is over-borrowing and over-spending better than over-investing?
Would you care to elaborate as to what bearing your list of assumptions has on the issue? It wasn't clear from your post.
