S-Corp will pay payroll taxes on "fair salary" even if none of the profits are distributed and all of it is reinvested back into the business. That's unfair too, isn't it? And it's very typical for a bootstrapped company - I keep burning through my savings and reinvest all company profits back into the business. Why should I pay payroll taxes on that? That money was never paid out to anyone and shouldn't be taxed as anything more than income tax.