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Comment by PurpleBoxDragon | Hacker News Reader

The core problem is that businesses have to pay taxes on net while you and I have to pay taxes on gross. We need to equalize this. Either both should pay taxes on all money that goes through them (and have to change market prices accordingly) or people should only pay taxes on money they don't use in pursuit of living.

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This would be chaos in most industries, where margins are razor thin. And it would be a trade nightmare, as low margin industries would just move all production offshore.

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.

It might work. B&O taxes are taken out of gross income, but no where near 30%:

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.

Ok, so tax private individuals on net instead of gross then.

You would either need to massively cut government services, or massively increase tax rates. Since only savings would be taxed, this would increase spending. In fact, you could even get the government to pay you money if you ran up extra expenses using debt and incurred a loss.

There is a reason no country in the world does OP’s proposal, or yours. They would turn things topsy-turvy.

> Since only savings would be taxed

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.

You can carryforward the loss to future years to avoid taxes. You're right, it's not an instant payment, just a deferral.

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)

Most people spend most of what they earn.

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.

In particular the one that aggravates me is childcare. A lawyer running their own practice can deduct their childcare as a cost of doing business. I, as a salary worker who also needs childcare as a cost of working, cannot. (Aside from the very limited DCFSA)

Childcare isn't a deductible business expense in most jurisdictions, including the us.

https://www.inc.com/manon-defelice/ceo-mom-expense-childcare...

I probably got bad tax info then, not surprising. I guess that's at least equitably unfair, then.

Leaving aside other complaints, on a nuts-and-bolts level, what is your tax law-definition of the 'pursuit of living'? Does this mean I'm only taxed on what I save? (time to pursue another solid gold toilet to... live on!) Or do the prince and the pauper alike get to deduct the same 'pursuit of living' credit and pay tax any remainder?

They aren't similar entities though.

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.

The business doesn't have to have the crane, but a person dies without eating. If we only have to tax one, tax the crane.

You want a business who has revenue of $100M and expenses of $150M to pay taxes?

If I have expenses that cost me $150K this year but I only make $100K I often have to pay taxes. Some expenses are deductible in certain cases, but even then it isn't equivalent.

All I'm saying is that both should be treated equally, which ever option that ends up being.

But they aren’t equivalent, that’s why they aren’t treated the same.

You are right in that they aren't equal. The things I need to survive I'm taxed on the money I make to spend on them and then I'm taxed when I spend on it. The things a business needs to make more money, it isn't taxed on at all. If anything, the system is the opposite of what it should be. This is a way that the tax code insanely favors the wealthy, and it is so drilled into our subconscious that many see it idiotic to even question the way things currently work.

Maybe. What portion of the expenses went to executive salaries in exchange for this stellar outcome?

Does it matter? Those salaries are taxed. Indeed, all expenses are taxed because every dollar of expense represents a taxable gain at some point in the supply chain.

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