[QUOTE=SaintCad]
Second, the one thing that should be expensed out for corporations is payroll - I didn’t put that in originally because the question (maybe I’ll start a thread in GD) was not about creating an equitable tax system.
[/QUOTE]
But why? Labor is just another expense that has to be covered by sales, and therefore the revenue generated to pay for it should be taxed.
You’re just making an exception because clearly I pointed out how it would negatively affect you. Essentially, your position was modified to “I didn’t mean the revenue that paid my salary - I mean the revenue that pays everybody else’s (including the vendors, the suppliers, the outsourced janitorial service, the food in the cafeteria, etc etc etc.)”.
Though this is really getting into GD territory. Think I’ll go over there and see if you started that thread.
Third, the argument that both people and corporations get to deduct business expenses (implying it’s fair) is a fallacy because almost all expenses for a corporation are for business while almost none are for a person. .
[/QUOTE]
It is fair. In theory, Business expenses increase a Business’s income. More Advertising means more sales, more CoGS means more merchandise to sell, more Payroll means more dudes out there selling, and etc.
Exactly why your business expeneses are also deductable. If you are a Commissioned Salesman, more business meals means more sales, more milage means more sales and so forth. Education expeneses are deductable as they lead to more income.
But your personal expeneses do not bring you in more income.
For those not aware of this, the OP has opened a thread to debate this topic in GD. I’ve already posted in that thread, so I won’t repost those comments here. While there certainly are legitimate factual answers to this question, once you get into the details about what is fair and not fair, you might want to move over to the GD thread.
[QUOTE=Balthisar]
If you have your own corporation, your goal should be to have no profits. Then, no taxes. How do you make money with no profits? Well, pay yourself a salary and pay income tax on that.
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Well, dividends, actually. No FICA that way.
[QUOTE=InvisibleWombat]
Well, dividends, actually. No FICA that way.
[/QUOTE]
Yeah, but dividends are corporation profit, on which you have to pay corporate taxes. Which costs more? I honestly don’t know. Let’s assume you own 100% of shares and have an operating surplus of $150,000 per year – not too shabby – before you pay your salary. Now, what’s cheaper? Paying yourself $150,000 in dividends and paying corporate tax on that, or paying yourself a salary of $150,000, paying no corporate tax, but paying all of the income taxes and social security and so on?
Actually, that presents a new question: if you make no salary and only take dividends for the rest of your life, have you found a good way to avoid paying into social security? You could probably do a lot more with that >15% privately invested, assuming you don’t need disability benefits or anything.
[QUOTE=SaintCad]
This doesn’t really answer the question - why are corporations taxed on profit while individuals are taxed on revenue?
[/QUOTE]
Both Individuals and Corporations are generally taxed on income (there are sales taxes and excise taxes too but I suspect the taxes you are talking about are income taxes). Both individuals and corporations get to deduct the cost of producing revenue. A long time ago, someone tried to deduct that cost of buying suits and shoes for his job and it turns out that clothing, food shelter etc. are not costs of producing revenue.