But under Subchapter S of the tax code, corporations can elect to be taxed on a pass-through basis, avoiding one layer of tax.
The purest option is to abolish corporate tax entirely and instead have one layer of tax levied on the income individuals receive from investments in firms.
Dennis Hof, owner of the Moonlite Bunny Ranch in Mound House, said his brothel was the "highest private taxpayer in Lyon County" and questioned why anyone would "consider another layer of tax on me.
And while the White House rebuked Mr. O'Neill for his apostasy, President Bush himself is said to have misgivings about adding a huge new layer of tax cuts to those already enacted.
The partnership tax rules were originally created for small business, so a small number of individuals could work in a business together and mix together labor and capital without having to pay an extra layer of tax.
"It's not about evasion but about avoiding an extra, gratuitous layer of tax," says John Collis of Conyers Dill & Pearman, a Bermuda law firm.Such structures offer legal neutrality too.
The Private Equity Growth Capital Council, a lobbying group, said the spread of pass-through companies had created jobs and helped the economy, arguing that adding another layer of tax by treating them as corporations would run counter to bipartisan efforts to streamline the tax code.
It used to be that the second layer of tax could easily be avoided.
But then there are respectable fund firms like Fidelity, Janus and T. Rowe Price that offer the unneeded double layer of tax protection.
Above that $5 million, there's a 35% estate tax, as well a second extra layer of tax (known as the generation-skipping transfer tax) for bequests to grandkids whose parents are still alive.
