> You maximize profit. the amount of tax you pay on profit is irrelevant to the process of maximizing it.
No, I maximize my take-home, also called risk-adjusted net returns. Along with any other values you have such as environmental concerns. Gross profit (what is taxed) doesn't matter. What matters is how much ends up in your pocket. Here are some rough numbers from the choice I actually had to make three years ago. I could either:
A) Continue to run a business with the following numbers:
Payroll expense $100,000
Tax and compliance $40,000
Other expense $20,000
Net take-home $40,000
B) I could take a job working for the government with these numbers:
Note that "before-tax gross profit" doesn't appear in the calculations, because it doesn't matter. What matters is how much goes in my pocket after all expenses, including payroll with payroll taxes, direct taxes, compliance cost, everything. You'll note that the number that matters, net take-home, was higher if I laid off my two employees and took a government job. So that's what I did.
You may also note that if the taxes and compliance costs were half as much, the net take-home would have been better by keeping the business open and my employees would still have jobs.