Meals, travel, vehicles, basically everything a regular person has to spend out of their own income to survive, these people get away with expensing as business expenses.
That's actually not true, and is in fact the point of the IRS auditor. Namely, that people are expensing these items as business deductions when they are in fact normal living/lifestyle expenses.
A partner at a law firm can easily get away with expensing 1 of their 2 luxury cars, 50% of their meals, 50% of their travel, their home computers and software, etc. Car companies even make SUVs and Crossovers that are slightly over 6000lbs so they can be deducted as 'working' trucks for white collar workers.
If it wasn't setup as the employer paying for 1/2 of it, do you not think that most workers would want to be paid 7.5% more to pay it?
However, those people are not getting away with expensing them, because the IRS has no statute of limitations on going after these sorts of issues (income tax returns which are fraudulent are not subject to a statute of limitations, which means that the related crimes aren't either). Basically, it's a timing issue of when they get punished for the tax evasion, though at some point the backlog gets big enough that they might have to triage out the smaller cases.
All I'm saying is that both should be treated equally, which ever option that ends up being.
For the thin margins, imagine a company that makes 2%. But they pay 30% tax. Suddenly they’re at a loss on every sale due to tax. So thry raise price. Except every component in their chain alos does this.
You’d probably also see a lot more vertical integration. No sale, no tax. Whereas separated companies have to pay tax every time thry deal withan outside company.
But the world is not vertically integrated. So this tax plan wouldmforce america to drop best practices and go for extremely inefficient methods.
Your plan for fairness would almost certainly destroy the economy.
The middle ground we have now is personal exemptions and the standard deduction, which gives single individuals $16,000 in Federal tax-free income. Which is fair-ish. Certainly it's more fair now than when only upper-middle class people with mortgages and high property taxes were able to itemize.
There is a reason no country in the world does OP’s proposal, or yours. They would turn things topsy-turvy.
This seems wrong. I would think you would only be able to deduct basics like food and housing, maybe vehicles, with limits. Admittedly, that does get complicated really fast. In fact, as a pastor technically working as a contractor, my dad was able to deduct housing expenses for his whole family. It's not entirely unheard of.
Also, I don't believe getting the government to pay you by deliberately incurring a loss works for business, so I don't see why it would for individuals.
It would indeed be an enormously complicated system. And for what benefit?
(Americans actually have one of the most deduction heavy tax systems in the world btw, including mortgage interest. In Canada we have almost no deductions of expenses from income tax. So our taxes are very simple. Complex taxes favour the rich, and require auditors)
https://en.wikipedia.org/wiki/Business_and_occupation_tax#Ma...
So a federal B&O scheme might work if the rate was low enough. Auditing a business would be massively simplified, no need to carefully check expenses and write-offs to calculate net income. Compliance would be much easier. The question is would gross income taxation create a bigger pie, and would that pie be big enough that a low rate would substantially tax revenues.
https://www.inc.com/manon-defelice/ceo-mom-expense-childcare...
Individuals shouldn't be able to misrepresent personal expenses as business costs, but the amortization of a $500,000 crane also isn't all that similar to needing to eat.