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Comment by frame_perfect | Hacker News Reader

> Advertising expenses should not be deductible business expenses at all.

Wait, WHAT!? Advertising is a tax-deductible business expense? Why on earth?

Business expenses are tax deductible by default. They only change to non-deductible under special circumstances, for example if the company buys a fancy car for the CEO's personal use. But normally every expense incurred as the result of carrying on business is deductible. That includes payroll, infrastructure, cost of sales, advertising, market research, utilities, postage, travel, contractors, consultants etc.

In general an expense is deductible as long as it has a legitimate business purpose.

Sure. Businesses (in the US, anyway) pay tax on their profits, not their revenue. Profit is revenue minus expenses. Advertising is an expense, just like all of the other expenses that go into successfully bringing a product to market (research and development, transportation, etc.).

Wouldn't it be interesting if personal income taxes worked the same way?

(Capital gains tax kinda does, at least in the jurisdictions I know about; you can offset losses against gains. But earned income seems just as much like business revenue as capital gains...)

Personal income tax is more restricted but still works in a similar way. For example if I need to purchase a high-vis work outfit in order to do my job, that expense is deductible.

You also need to purchase food, housing and clothes to perform your job but those expenses aren't usually deductible so I would say there's a double standard.

I would imagine most lawmakers would actually agree with you too if it wasn't difficult to distinguish bare minimum spending with nice but not absolutely necessary spending.

Where do you draw the line between, "I need clothes to function as a human being", and "I buy clothes because I'm into fashion?"

We could probably come up with some general fair-ish rules, but their effects on consumer spending might do more harm than they help.

Why is this less of a problem when a business buys nicer work clothing than strictly necessary, or nicer lunch than necessary?

I wonder how different things would be if these types of business spending were not tax-deductible. Maybe it would permeate into society at large.

It once did.

Most consumer debt was tax deductible. I believe it changed in the 1970s.

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