[yxn2dC07]

Reinvestment isn't necessarily the best way to use capital. It seems to me that a tax structure that encourages profits to be poured back into a company rather than taken out and applied to another purpose would stultify an economy.

Let's say you have a profitable accounting firm in a small town. Since there's a limit to the market's need for accounting services, and since there are very few capital intensive aspects of accounting (no heavy machinery or the like), reinvesting profits might lead to a less ideal outcome than taking those profits and investing them in another venture, or depositing them in a bank.

Very true. That said, the accounting firm could open up a second office in a different market. There are pluses and minuses to the incentives of both tax system layouts.