Kicking around an idea for "fixing" US complex/abuse-prone partnership tax regime:
one Trade or Business tax that applies to all businesses, in whatever form incl. self-employment
C corporation law applies EXCEPT dividends not taxable
Rate equal to highest individual income tax rate
Everybody gets one layer of tax. Self-employed can get benefit of lower individual rates by paying compensation (deemed in case of sole prop) No basis moving or other shenanigans.
Downsides, which are sort of the flip side of the "shenanigans":
no tax-free way to take appreciated property back out of a business once contributed. But maybe a provision allows distribution tax-free to the owner who contributed property. Let people mulligan but don't let them move stuff around.
no way to get losses out from, e.g. real estate businesses. But maybe let people flexibly group businesses. Can't offset your wages but can offset your other business.