Keep in mind that S-corp owners (full disclosure: I am one) pay not just the employee's side, but also the employer's side, of FICA -- so what's 7.5-ish percent of payroll to a typical employee is actually 15-ish percent to a small business owner.<p>Also, if you happen to be contributing to a SEP IRA, or concerned about the size of your eventual Social Security distribution (which is based on your 40 best payroll quarters), then you as an S-corp owner also have an interest in running a higher amount as payroll rather than profit.  It's a balancing act with multiple factors, as with most tax considerations.  Add in month-to-month cash flow uncertainty, and "reasonable" becomes very elastic very quickly.<p>Pure speculation, but I'd wager that the amount of tax avoided by small business owners by underpaying salaries is likely dwarfed by those avoided by the owners of bigger companies, who have the combined benefits of lobby power and armies of accountants figuring out loopholes for them.  But maybe I'm just cynical and getting old.