I doubt you understand the retail business. Wal-Mart almost certainly didn’t have a larger “legitimate net income” they are in the business of buying stuff and selling it for more than they bought it. Most of what they sell is very, very low margin. On top of that, they made a name for themselves as a discount mega retailer, meaning they are going to operate on small profit margins.
Probably the only companies that work on smaller margins than Wal-Mart are supermarkets (groceries are infamously low margin) and discount club stores like Sam’s Club and Costco (Costco actually would operate in the red every year if not for membership fees.)
Low margin businesses like Wal-Mart almost definitely aren’t significantly “hiding” net income, because they are a low margin business as it is.
I’m starting to wonder if you’re actually a tax payer. School loan interest is tax deductible, and you should get a 1098-E from your lender every year that shows how much interest you have paid. This is not only deductible, it’s one of the deductions you can make even if you take the standard deduction.
I seriously hope you aren’t filling out your own taxes.
As for sending employees to school, my understanding is up to a certain amount they can pay for your schooling and it counts as “training expenses” for them, and you do not have to count it as a taxable benefit. Over a certain amount, I believe they can no longer deduct it and you as the recipient have to count it as a form of income.
The travel/meal stuff is done the same way, your company can pay you a certain amount for meals/lodging and that is tax deductible and doesn’t count as income for you. If they pay you more than that, you have to count it as personal income and I also believe the company can’t take it as a deduction.
What I find funny is people like erislover, who are so quick to denounce the way corporations are taxed versus individuals, who show they actually don’t know how corporations or individuals are taxed at all.
The government lets anyone who is in business deduct expenses required to generate their revenue. Whether you are an individual who earns on a 1099 or a company. You can deduct vehicle expenses. you can deduct rent and utilities, at least against your 1099 / Schedule C income. There are rules about how much you can deduct (you can’t generally claim your entire rent/utilities/car expenses because if you fill out your form honestly you can’t honestly say that you don’t primarily use your apartment to live in as a private individual and you can’t honestly say that you never use your car for personal use.)
The way the government sees it though, as a wage earner, you are not a business. You are trading time for money. The government gives you certain deductions to help you with certain expenses as a wage earner. For example moving expenses purely related to a job can be deductible, certain purchases solely related to your wage earning job can be deductible. (Think special equipment that you have to buy as an individual for your job, but has no private use…such as a gun for a paid armed guard.)
The government also provides several generous tax credits and benefits that all private individuals can take advantage of, whether they are 1099 earners or wage earners.
As someone who receives a W-2, you aren’t really earning revenue. You aren’t taxed on revenue because you don’t generate revenue. You earn a wage, and you aren’t even taxed on that wage, you’re taxed on adjusted gross income which is your wage minus various subtractions you are allowed to make.
This notion of taxing corporations on revenue is just silly. It just doesn’t work that way…
As to individuals, even beyond individual businesses (which can claim expenses), everybody does get to exempt a certain amount of income and deduct a certain amount of expenses.
There are plenty of things to talk about in the areas of tax policies without going off the rails about deducting business expenses.
I find it so difficult to follow the liberal narrative these days. First it’s “Down with corporate personhood!” and then it’s “Tax them like people!” And they conveniently ignore that once we tax corporations differently than people, the CEOs take some of the profit and then pay taxes like people. It’s like they think there are two classes of citizens, a “Mr. Corporate Man” and a “Johnny the cashier”, that play by different rules.
Not really. A lot of it comes from things like the capital gains rate and qualified dividends rate and the cap on social security taxes.
Keeping up with the jones’ can be a bitch.
I think everyone that is criticizing you is missing your point.
You aren’t arguing for a gross revenue tax on corporations you are arguing for a net revenue tax on individuals.
Why should a corporation get a deduction for interest paid to fund the corporate jet but individuals don’t get to deduct interest paid to fund their commuter car?
Why should corporations get to deduct anything that might remotely be considered a cost of production when individuals cannot deduct the cost of the education that is a prerequisite to their job (and frankly corporations get to deduct research and development on stuff that doesn’t provide income yet so why can’t I deduct those night classes in poetry, I might become a poet someday).
Why shouldn’t I get to get to deduct the cost of work clothes? Or feeding and sheltering myself generally?
Why shouldn’t I get to deduct the cost of feeding, clothing and educating my family when a corporation can deduct the costs of subsidiaries?
IOW, why shoudn’t I get to take deductions that I would be able to take if I were a corporation?
Perhaps what you are arguing for is a larger standard deduction.
The average person would spend 10x as much on accountants than they’d save in Federal Income Taxes. “Ok, Sir. I’ve got lines 5 and 7 from June 12, 2011 KMart receipt as being work clothes. That’s another $35. How about this SmashBurger receipt from June 13, was that a business lunch? Ok, and the 7-11 receipt from the same day? Line 3 was a business-related SlimJim? Got it.”
Considering that a pretty sizable population pays no net FIT to begin with, the value of such a sweeping change seems dubious.
The reality is that a corporate income tax is virtually synonymous with an “excise tax” and excise taxes are born by consumers. Corporate income taxes are by and large regressive, because they most impact people who spend a large portion of their money on buying goods and services. The ultra-wealthy, while some buy really extravagant toys, don’t, on average, spend as much of their income on buying things as do the middle and lower class (many of whom essentially spend their entire paycheck each pay period.)
You can certainly have a progressive tax system (in fact ours is progressive, the wealthy do pay a higher effective tax rate than the poor and the middle class, even though in some circumstances they pay a lower effective Federal tax rate), but corporate taxes are really just excise taxes, and treating them as a great way to make sure the rich pay their fair share is misunderstanding how the economy works.
You make the rich pay their fair share by making the rich pay their fair share, taxes on corporations just make things more expensive, lead to people buying less things, lead to revenue drops at corporations, which lead to layoffs and less jobs.
Correct. Indirectly arguing, because of how obviously bad gross(ish) revenue taxes are.
That’s right. They don’t even pay sales tax on items meant for resale, so why does my car get taxed once when I buy it, and then again when the next buyer buys it? Tax laws are really very generous to business.
It’d be an OK compromise. I favor simplicity over other philosophies.
Perhaps you are unaware of people using this business model. For someone so quick to assume that I am wrong—and then point out directly that I am right in your ensuing diatribe—it’s curious that you’d miss something so plain as this.
Yes, it is very convenient to make a distinction without any difference when you then turn around and make the distinction matter. I guess the government thinks wage-earners don’t actually need shelter to work, so deducting rent wouldn’t be directly related to the job? What about electricity? I am curious how you feel this is a sensible policy. Please explain to me which deductions corporations are allowed shouldn’t count for individuals, because it isn’t related to “having a job,” since I apparently don’t understand anything.
I make no claims about my liberalness, and as far as I know this isn’t a party line anywhere. Furthermore, I don’t actually want to tax corporations like people.
They do get the standard deduction and the individual dependent benefit, so that is close to $10K they do not have to pay taxes on.
That’s part of the reason the standard deduction arose: so that people don’t have to keep track of every little donation and deductible expense (admittedly, not including rent and utilities). So part of the small taxpayer’s standard deduction is going toward some of those things, if only virtually.
Because corporations aren’t people. CEOs can deduct the same things you can. CEOs are people. What’s that have to do with their businesses? Why shouldn’t there be separate rules for the two?
What does that have to do with corporations? Are you suggesting that corporations should be taxed as if they were people?
I have heard this argument, and admit that it is at least somewhat compelling. However, it does raise a question in my mind:
If corporate income taxes were reduced to zero percent tomorrow, would consumer goods drop in price?
It seems to me that the answer is no - the price of a good or service is based on what the market will bear. Any reduction in price would only be due to new suppliers entering the market and increasing the supply. Now perhaps the reduced corporate tax would enter into this, but as someone not trained in economics I’m not sure I can see how.
An example: Currently I make widgets and the entire cost (material, labor, etc) is $9 per widget. I can maximize revenue by selling these at $10 per widget. My $1 profit is taxed at 30% for an after-tax profit of 70 cents per widget.
What part of that changes if the corporate income tax rate goes to zero? Or if it goes to 50%?
Taxes on business are fundamentally different than income taxes on individuals. In fact, taxes on corporations predate the income tax, which was created via constitutional amendment in the United States. A few years before, the Federal government started levying an excise tax on corporations. When the constitutional amendment allowing income taxation was passed, the corporate excise tax was renamed the “corporate income tax” but in reality it’s still functionally the same as an excise tax.
The distinction is actually very important. There is a fundamental difference between revenue and wages, and it means that practically speaking government can collect taxes based on your earnings but it can’t practically collect tax on gross revenue.
In a super-simplistic tax system, where an individual is taxed on say, 20% of their wage after certain exceptions (payments to 401k etc), you can just require that tax payer to automatically take 20% of their wage and remit it to you as withholding. The money is there for the taking, by definition, 20% of my pay after pre-tax deductions will always be there. That’s the beauty of percentages.
No, that isn’t what the government thinks. The government gives a deduction so that your tax burden isn’t too high, but it isn’t based on the policy that all expenses of life should be taken into consideration when determining your tax bill. Government is mostly interested in making sure it has enough money to perpetuate itself and on some levels that it has an ordered, functional society. It just isn’t possible for government to structure personal income taxes that will be fair to everyone, so it doesn’t even try. Instead there is a standard deduction that attempts to make some allowances for the fact that there are real things you have to spend your take home pay on, and thus it tries to insure that taxation can’t impoverish you by diminishing your take home pay to unreasonable amounts. (That’s what the standard deduction is for, and also why you can claim yourself as a dependent.) But it’s just not possible for the government to properly make things fair for every person. Two people with identical incomes and living in the same community might still have different things they “must” spend their money on, at different rates. The government wouldn’t have a functional tax policy if it tried to run personal income taxes this way.
But if you look at how government collects income tax on individuals, something that is guaranteed is that it gets money from where it really is. Taxing corporations on gross revenue would cause problems because gross revenue dollars genuinely isn’t money that a corporation really has.
It has to do with the CEOs that take some of the profit and then “pay taxes like people”. Except they don’t. They pay lower marginal taxes than “Johnny the cashier”* because they structure their pay – whether or not it’s actually from invested capital gains – to appear to be capital gains.
*Or even lower taxes full stop, if you count the employer’s portion of payroll taxes.
For sure, its convenience is great. I don’t know about you, but I am pretty sure I couldn’t keep my job on $10,000 a year. I’d have to live in a van and I am certain I’d be fired for lack of hygiene if I wasn’t constantly in jail because of tresspassing or vagrancy (you can’t just sleep in a vehicle anywhere you want). So is the standard deduction doing its job very well, under such a view? Is it even an approximation of how other entities are treated?
They have been created differently. That doesn’t indicate any intrinsic, necessary difference.
Of course it can! Are you going to sit here and tell me sales taxes don’t exist?
I’m trying to envision a world where revenue taxes cannot work on business for the exact same reason and I admit I am totally at a loss. There really is no deep philosophical difference between businesses and individuals when it comes to taxation. Both need places to conduct themselves, both need to invest in the future, both have costs associated with their product. I’m sorry, but you don’t get to have it both ways. Frankly, revenue taxes are silly and individuals are treated like shit, while corporations and the very wealthy end up basically paying a tax on savings. (Which is also a little stupid for other reasons but it’s tangential.) If businesses can do it, and if I can start a business, then god damn it, I can do it. Except I can’t, because for some reason wage earners are molded wholly out of tax laws and forced into a class that has no other reason to exist, except to tax more than the people making the rules.
We both know this is the case. What no one seems willing to say but me is that this is nonsense, if it grants such concessions to anyone else.
That’s not even what I am talking about. I am not asking for fair tax, I’m asking for it to be consistent. If we’re a classless society, then we’re a classless society, and that’s that. Here’s how everyone pays taxes. You want corporations to be people-like? Then they’ll pay taxes that way, too. Is this “fair”? I doubt it. I’ll leave fairness to the far left. The truth is, the right cries about taxes all the time, but this tax scheme, which doesn’t even try to be “fair” or “redistributive”, would in fact help the poor, because they just don’t have any savings to tax. The very fact that there is resistance to this idea from people who think I am a flaming liberal (not counting you in this) just goes to show you that the right actually knows it treats individuals like shit and cannot even imagine treating the rest of them like that. If you can’t see how fucking pathetic that is, this conversation is just over.
This just makes no sense and I cannot believe you would even suggest it.