# Explain to me how American taxation is fair. **URL:** \ **Category:** Great Debates\ **Created:** [February 9, 2010, 3:03am UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228 "2010-02-09T03:03:52Z")\ **Posts on this page:** 18\ **Page:** 3
**Author:** ![Clothahump](https://avatars.discourse-cdn.com/v4/letter/c/51bf81/32.png) [@Clothahump](https://boards.straightdope.com/u/Clothahump)\ **Post date:** [February 10, 2010, 6:02am UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/41 "2010-02-10T06:02:53Z")
Our tax system is not fair. Nobody ever said it was. ---
**Author:** ![Todderbob](https://avatars.discourse-cdn.com/v4/letter/t/e47774/32.png) [@Todderbob](https://boards.straightdope.com/u/Todderbob)\ **Post date:** [February 10, 2010, 6:27am UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/42 "2010-02-10T06:27:41Z")
> [@Saint\_Cad](#): > > What does “social value” have to do with anything?! > > I make widgets. I made $100 million selling widgets. I spent $40 million on widget workers, $20 million on widget wood, $10 million on sandpaper, lathes, etc. I also spent $20 million on a new plane to entertain clients as we go to Vegas on the company dime and we just bought the rights for the local stadium to be named Widget World. > > Are you honestly going to tell me that out of that list, you cannot pick out which costs went directly TO THE MANUFACTURING of the widgets? > > As I have said repeatedly - companies should be allowed to expense out manufacturing costs, just not all costs. If they want to spend $80,000 on a company car for the CEO, it should be with the expectation that somehow it will somehow generate at least $100,000 (at 20% tax rate) in new revenue. If it doesn’t TFB but they should not be expensing it out for tax purposes because (and this is the important part all y’all seem to be missing), that car does not contribute to the product manufactured or service rendered. > > Once again. tax a company on revenue MINUS MANUFACTURING COSTS. By giving that CEO that 80 thousand dollar car to drive, they’ve increased the effective value of the position that he holds, and therefore can recruit a higher tier of employee. This allows them to run more efficiently, have higher stock prices, etc, or are you arguing that having better employees running your business _doesn’t_ add to the value of the company? Maybe Steve Jobs is just a dolt who happened to be in the right place at the right time. Or, _maybe_, he was the catalyst that drove apple from near-bankruptcy by stimulating or allowing for clever marketing, clever products and a strong company brand name. But then, you’re arguing that a strong company brand name doesn’t go towards the value of the item, also. Never mind that in most car dealerships, there’s between 300-600 dollars in “advertising expense” hidden into the retail price of the car. Never mind that in most computer stores, there same thing happens. Hell, even in grocery stores, you pay for advertising. But, you are shopping at that grocery store, aren’t you? But that couldn’t be because they advertised, could it? ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [February 10, 2010, 3:12pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/43 "2010-02-10T15:12:17Z")
> [@Saint\_Cad](#): > > Once again. tax a company on revenue MINUS MANUFACTURING COSTS. Even this statement alone is one of the most business-ignorant I’ve ever seen on this baord. And that’s saying a _lot_. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 10, 2010, 3:48pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/44 "2010-02-10T15:48:14Z")
Why do you anti-corporate types insist on anthropomorphizing companies as if they are actual human beings? Corporations are organizations, not a single person. Even though for certain legal and tax purposes, they can be treated as a person. Ultimately when you punish or tax large companies, all you really do is hurt the people who work for them. > [@Saint Cad](#): > > For me it is a simple cost benefit analysis: spending $100million on naming a stadium should generate more that $100million in revenue AFTER TAXES so at a 20% tax rate for example, the cost should return 125% return on investment to break even. What about businesses with very small margins like grocery stores? Should we drive up the cost of food by 20%? ---
**Author:** ![mske](https://avatars.discourse-cdn.com/v4/letter/m/ccd318/32.png) [@mske](https://boards.straightdope.com/u/mske)\ **Post date:** [February 10, 2010, 4:27pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/45 "2010-02-10T16:27:26Z")
> [@Saint\_Cad](#): > > What does “social value” have to do with anything?! > > I make widgets. I made $100 million selling widgets. I spent $40 million on widget workers, $20 million on widget wood, $10 million on sandpaper, lathes, etc. I also spent $20 million on a new plane to entertain clients as we go to Vegas on the company dime and we just bought the rights for the local stadium to be named Widget World. > > Are you honestly going to tell me that out of that list, you cannot pick out which costs went directly TO THE MANUFACTURING of the widgets? > > As I have said repeatedly - companies should be allowed to expense out manufacturing costs, just not all costs. If they want to spend $80,000 on a company car for the CEO, it should be with the expectation that somehow it will somehow generate at least $100,000 (at 20% tax rate) in new revenue. If it doesn’t TFB but they should not be expensing it out for tax purposes because (and this is the important part all y’all seem to be missing), that car does not contribute to the product manufactured or service rendered. > > Once again. tax a company on revenue MINUS MANUFACTURING COSTS. The $80,000 car “given” to the CEO gets reported as part of his/her taxable income, so there is tax paid on it there. The $20 million stadium naming expense (which is amortized over the number of years that the naming rights were bought for - let’s say 10 years, so $2 million expense per year - don’t confuse cash flow with actual p&l) is reported as revenue at the stadium corporation, so it gets taxed there. ---
**Author:** ![Chief\_Pedant](https://avatars.discourse-cdn.com/v4/letter/c/a6a055/32.png) [@Chief\_Pedant](https://boards.straightdope.com/u/Chief_Pedant)\ **Post date:** [February 10, 2010, 5:15pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/46 "2010-02-10T17:15:23Z")
> [@foolsguinea](#): > > We do tax wealth, but only when you die. Well, yeah, but mostly for those too slow to have done proper estate planning. And that ain’t the rich. ---
**Author:** ![Thudlow\_Boink](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thudlow_boink/32/320_2.png) [@Thudlow\_Boink](https://boards.straightdope.com/u/Thudlow_Boink)\ **Post date:** [February 10, 2010, 5:40pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/47 "2010-02-10T17:40:23Z")
> [@DigitalC](#): > > I don’t understand why you think taxes are supposed to be fair. I pay for schools and i don’t have children, i pay for roads and i don’t drive, nobody asked me if this was fair. > [@suranyi](#): > > As has been said on this thread, “fairness” is a meaningless concept when it comes to taxation, simply because there can never be concensus on what that means. What’s fair to one person will be unfair to another. > [@Chief\_Pedant](#): > > It’s hard not to mention that life is unfair… Maybe the OP should have used the word “consistent” rather than “fair.” He seems to be bothered by the fact that corporations play by one set of rules, private individuals by a different set, and to be asking, “Why the inconsistency?” ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [February 10, 2010, 6:43pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/48 "2010-02-10T18:43:17Z")
Are they inconsistent in this regard? If you’re a sole proprietor and unincorporated, you can still declare advertising against business revenue if you’re self-employed. You can also claim transportation expenses. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [February 10, 2010, 6:57pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/49 "2010-02-10T18:57:54Z")
> [@Thudlow\_Boink](#): > > Maybe the OP should have used the word “consistent” rather than “fair.” He seems to be bothered by the fact that corporations play by one set of rules, private individuals by a different set, and to be asking, “Why the inconsistency?” There is no inconsistency, or if there is, it’s in the concept of taxing both business AND people. In theory, the ultimately efficient tax would tax either all direct economic activity (i.e., business) _or_ all personal income. The problem with taxing business is that it’s not nigh-impossible to separate personal business activities from personal income, which is why we don’t try. Taxing corporations, for instance, is rather stupid on the face of it. Ultimately, the company must send all its money to actual people, one way or the other. Taxing them hinders their theoretical economic performance (and hurts economic effiency) relative to other business structures. However, as a practical matter it’s not a huge hindrance (or at least, wasn’t until recently for reasons I won’t get into here) because of the various advantages of a corporate form. ---
**Author:** ![crazyjoe](https://avatars.discourse-cdn.com/v4/letter/c/f14d63/32.png) [@crazyjoe](https://boards.straightdope.com/u/crazyjoe)\ **Post date:** [February 10, 2010, 8:05pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/50 "2010-02-10T20:05:45Z")
> [@mske](#): > > The $80,000 car “given” to the CEO gets reported as part of his/her taxable income, so there is tax paid on it there. > > The $20 million stadium naming expense (which is amortized over the number of years that the naming rights were bought for - let’s say 10 years, so $2 million expense per year - don’t confuse cash flow with actual p&l) is reported as revenue at the stadium corporation, so it gets taxed there. The 80k car is only taxed to the CEO if he doesn’t have a way to shelter it somehow. Many do. The 20 million is only taxed to the degree that it winds up being profit for the stadium. I think this is the argument. I don’t necessarily support it one way or another, but it’s naive to think that just because the money is spent, that it will be taxed, and it’s even more naive to suggest that just because it was taxed once, it can’t be taxed again. ---
**Author:** ![Quartz](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/quartz/32/267_2.png) [@Quartz](https://boards.straightdope.com/u/Quartz)\ **Post date:** [February 10, 2010, 8:33pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/51 "2010-02-10T20:33:11Z")
> [@Grumman](#): > > Really? Who is going to defend his ability to trade freely and fairly _from the Americans_? They are, after all, exploiting their position of power to make him buy a service he doesn’t want or need. On the contrary: America defends his IP rights at the international level and his personal safety. If he gets into trouble, the American consulate will do their best to help him. And if push really comes to shove, America will park a carrier fleet nearby. Britain sent a warship to help evacuate Montserrat. Britain sent a fleet to free the Falkland Islanders. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [February 10, 2010, 9:47pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/52 "2010-02-10T21:47:01Z")
> [@foolsguinea](#): > > We do tax wealth, but only when you die. More accurately, we tax wealth only when you inherit a very large chunk of it (although I personally think the lower bound on “very large chunk” should be higher than it now is). Once you’re dead, you don’t pay any more taxes. Your heirs, however, do pay taxes on whatever taxable assets you leave to them (depending, as **Chief Pedant** noted, on how savvy you were with your estate planning). ---
**Author:** ![Desert\_Nomad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/desert_nomad/32/177_2.png) [@Desert\_Nomad](https://boards.straightdope.com/u/Desert_Nomad)\ **Post date:** [March 17, 2010, 7:06pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/53 "2010-03-17T19:06:37Z")
> [@Quartz](#): > > On the contrary: America defends his IP rights at the international level and his personal safety. If he gets into trouble, the American consulate will do their best to help him. And if push really comes to shove, America will park a carrier fleet nearby. Britain sent a warship to help evacuate Montserrat. Britain sent a fleet to free the Falkland Islanders. Read “Motoring with Mohammed” by Eric Hansen to get a good idea of just what the US Embassy will do for you (not much). It is a great story of being shipwrecked in Yemen. ---
**Author:** ![Piker](https://avatars.discourse-cdn.com/v4/letter/p/ba9def/32.png) [@Piker](https://boards.straightdope.com/u/Piker)\ **Post date:** [March 17, 2010, 8:02pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/54 "2010-03-17T20:02:43Z")
> [@DigitalC](#): > > I don’t understand why you think taxes are supposed to be fair. I pay for schools and i don’t have children, i pay for roads and i don’t drive, nobody asked me if this was fair. Really? You don’t think that educating and babysitting children in your neighborhood benefits you? You don’t think roads that transport people and goods benefits you? Really? ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [March 17, 2010, 8:05pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/55 "2010-03-17T20:05:58Z")
Most localities have wealth taxes–you pay property tax on your house, or you pay rent to your landlord who has to pay property taxes. Businesses pay property tax on their business properties. There are also excise taxes in some places on boats and vehicles. It’s true that there are no federal wealth taxes that I can think of. Even the inheritence tax isn’t a tax on the wealth of the person dying, it’s a tax on the income of the person inheriting the wealth. ---
**Author:** ![billfish678](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@billfish678](https://boards.straightdope.com/u/billfish678)\ **Post date:** [March 17, 2010, 8:19pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/56 "2010-03-17T20:19:51Z")
Why should companies pay taxes on income or profit period? Besides maybe property tax so they pay their fair share for police and fire protection and such like every other physical entity. All that money flowing through a business is taxed anyway and paid for the customer, the investors, blah blah blah IMO taxing businesses directly is just a way to hide the fact we are taxing real people. Its not like companies are people or something. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 17, 2010, 8:29pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/57 "2010-03-17T20:29:36Z")
> [@Saint\_Cad](#): > > A lot of you are misinterpreting what I said. > > I never said tax revenue! I said to tax revenue - (COGS + payroll + depreciation associated with manufacture + etc.) > > For example: A company has revenue of $100 million with $40 million in payroll, $20 million in COGS, $10 million in new equipment and $30 million to name a stadium and buy a new Lear jet. Their profit for tax purposes is $0 but I contend it is really $30 million counting the costs DIRECTLY associated with the product manufactured or services rendered. The stockholders, or, more plausibly, Wall Street, are the best people to judge which expenses make sense or not. There are also accounting rules. Advertising is clearly an important expense, and a stadium is just a form of advertising. If a company pays a million bucks for one minute of SuperBowl time, perhaps $40 million for a big sign and a mention on every sportscast is perfectly reasonable. I’m a liberal, but even I don’t want the IRS making judgments about whether an expense like this is worth it or not. ---
**Author:** ![Mr\_Smashy](https://avatars.discourse-cdn.com/v4/letter/m/2bfe46/32.png) [@Mr\_Smashy](https://boards.straightdope.com/u/Mr_Smashy)\ **Post date:** [March 17, 2010, 9:16pm UTC](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228/58 "2010-03-17T21:16:26Z")
I’m not sure if you were thinking of this, but Government Contractors (at which I’ve worked my whole life) have large classes of expenses that are referred to as ‘unallowable’. Expenses like alcohol, advertising, trade shows, political contributions, and some other expenses are not ‘rolled into the rates’ for cost-plus contracting, which until recently was the predominant type of gov contracting (this administration unfortunately has a penchant for firm fixed price). In effect this does put a burden on companies, much like a tax, inasmuch as those expenses come right off the bottom line, not the top. PS The idea of taxing rev instead of net income is insane. It sounds like some think that you could just exclude certain classes of expense from ‘write-off-ability’? Sounds needlessly complicated and would get very political very fast (think the networks and newspapers might bitch about it once their advertising rev gets cut in half?) about what would be exempted as a ‘legit’ business expense and what would be excluded. [Previous page](https://boards.straightdope.com/t/explain-to-me-how-american-taxation-is-fair/528228.md?page=2)