A radical idea on taxation

Discussion in 'The VIP Lounge' started by DYohn, Nov 10, 2017.

  1. DYohn

    DYohn Well-Known Member Donor

    If this belongs in the War Zone, then delete it as I don't participate there. But I had this thought the other day and thought I'd share with my friends here:

    Since the Supreme Court in "Citizens United" ruled that corporations are people in terms of First Amendment protected speech, why not treat corporations and people equally in terms of taxation?

    What is called individual income tax is actually a revenue tax. Individuals are required to pay taxes on each pay check based on the amount they are paid. Then at the end of each year that total gets adjusted based on certain deductions, etc. The actual costs of living are not taken into account.

    Businesses do not pay tax on revenue, they pay tax on profits. They deduct all costs of doing business from gross revenues and then pay taxes on what is left over.

    Why not treat both the same? Either tax businesses based on their receipts, or allow individuals to deduct all costs of living and then pay tax on their profits? It only seems fair.
     
  2. Phil A

    Phil A Active Member Top Poster

    It would just take a massive re-write of the whole tax code with appropriate deductions, etc. At the moment, and for a long time, it doesn't appear that Congress can even pass individual tax reform. There is also the problem of multi-national corporations. They tend to set up subsidiaries and sometimes distort their income (and it may not be on purpose just the nature of complying with laws in different countries) in a particular Country. That is why some States tax on the unitary method of income - The Evolution of the Unitary Tax Apportionment Method

    Individuals do not have the ability to take what they earn and stick the income in a different jurisdiction. That is why sometimes you see corporations setting up subsidiaries to operate outside the US - e.g. American Companies Like Offshore Tax Havens Too

    It's a very complex subject. But the bottom line is that Corporations have the ability to shift income. Individuals do not. You can't work full time and sit in an office in Phoenix, AZ and say your income is in another State or Country. Corporations, on the other hand can have a HQ in Phoenix, AZ and do business in a manner that spreads their income over more than one State or Country.
     
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  3. Chris Slade

    Chris Slade Active Member War Zone Member Top Poster

    Hmm, I spend a fair amount of time thinking about stuff like this, and in Canada we have a government who is currently trying to tax small and medium sized businesses more. It is not going well for them, probably a one term government as a result.
     
  4. Dan Driscoll

    Dan Driscoll HTT Refugee Donor War Zone Member

    In the abstract it sounds good, but for reasons already stated and more, would be almost impossible to implement.
     
  5. Phil A

    Phil A Active Member Top Poster

    The tax codes, both Federal and State were implemented many years ago. Way back then (e.g. many sales taxes were passed in the 1940s), the world and technology was very different. For example, in a simple case, when sales taxes were implemented we were a manufacturing based economy (no electronic/digital transmissions of products/services). If someone performed a service, it was done in a particular locale. Mobile phones are a good example of technology. When they first came out some jurisdictions tried to tax them where the area code was located or where the call was picked up by the initial cell tower. There are places where one can be on a cell phone and pass thru multiple cell towers in different jurisdictions on a phone call. Another example is FW Dodge, which is part of McGraw Hill (Construction Projects, Bids, Leads - Building Plans - Dodge Projects). They produce reports on new construction projects as part of a service. For example, the Hammond Organ Company may want to know when a new church is going up. States will seek to tax the service where the customer is, which may not be the same as where the Company performs its service. Similar things occur with online services where one can have an ISP (e.g. AOL) that authenticates its customers at the location of its data centers but jurisdictions want to situs them to the location of the customer. It gets more dicey when one adds international elements (Countries) into the mix.
     
  6. CJ

    CJ Well-Known Member Admin War Zone Member

    Top Poster Of Month

    I'm all for a simplified tax code for both citizens and corporations but I'm not sure this is the most compelling system I've seen proposed ;)

    My issue right now is I feel especially fucked. As a high earning working professional I'm paying six figures in income tax while I know there are millionaires paying less than me. I got a good chuckle out of house Republicans citing $450,000 as middle class but in reality, someone making $450k has a LOT more in common with someone making $45k than they do with someone making $45M. As a wage earner, I have no way to "hide" my wealth.

    We can't fix this problem by taxing the ultra rich to death but just on principle we need to find a way to make them pay an amount commensurate with what regular wage earners pay regardless of actual income.
     
  7. DYohn

    DYohn Well-Known Member Donor

    My intention in bringing this up was not to say "eureka I have the answer!" so much as it is to spur discussion, so I appreciate that is what's happening. It is an extremely complex issue and there are no easy answers - or at least no easy answers that could ever make it through our political process.
     
  8. CJ

    CJ Well-Known Member Admin War Zone Member

    Top Poster Of Month

    Yep, and this is one of those areas where you could legitimately get 75% of the population to agree to a plan and it still wouldn't pass due to special interests.
     
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  9. Chris Slade

    Chris Slade Active Member War Zone Member Top Poster

    CJ's comment about taxing the very wealthy is a pretty common line of thinking (at least I think it is common). But it really accomplishes nothing. Here we have a government that was elected on the promise of making things better for the middle class.
    What that turned out to be was an attempt at taxing anyone who is upper middle class or more, or a business owner at much much higher rates. Actually doing nothing for the middle class.

    I don't disagree with anything CJ is saying. He is right as a wage earner he has no way to hide his wealth. I am a business owner and pay myself wages so I can also hide none of that income personal income. There are games to be played inside the business, but I just don't make enough to get into that stuff. Wage earns who can afford to save can invest in things that are taxed at a lower rate than their wages, and they should if they can.

    Tax reform and electoral reform are two of the things that I think are much more complicated than the vast majority of us will ever have to time to research enough to fully understand.

    And don't even get me started on property taxes, or tax on tax at the gas pump, or land transfer taxes, or increasing user fees on government provided services and saying those are fees not taxes, so my government did not raise taxes, or having the government collect sales tax on used vehicle sales which are sold privately between two parties.
     
  10. DYohn

    DYohn Well-Known Member Donor

    In a civilized society, taxes are a necessary evil if the society wants to have a government that provides services to the population. As always the debate is what those services are (or what they should be), how much they need to cost, how much the government wastes, and how much tax the population can bear. The current discussion in Washington DC is just another in the long history of this debate which will continue as long as there are governments and as long as there are people with opinions. My hope is that we can someday develop a system that shares the necessary pain of taxation in some equitable fashion. We do not have that system now, nor do I think the current proposals in our Congress get us any closer to one.
     
    Last edited: Nov 10, 2017
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  11. Drew

    Drew Well-Known Member War Zone Member Top Poster

    Perspective is everything. I don't think someone making $45k would agree with you.
     
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  12. Drew

    Drew Well-Known Member War Zone Member Top Poster

    Tax topics always remind me of this.

    di_05812.jpg
     
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  13. CJ

    CJ Well-Known Member Admin War Zone Member

    Top Poster Of Month

    And that is actually part of the problem. The real rich have been able to start and stoke a class war between the poor and middle class to divert attention.
     
  14. CJ

    CJ Well-Known Member Admin War Zone Member

    Top Poster Of Month

    Sure, but I would never advise anyone to pick a sub-optimal investment because of the tax treatment. Not everyone should be jumping into municipal bonds because of taxes.
     
  15. DYohn

    DYohn Well-Known Member Donor

    I have a good friend who earns between $2 and $5 million a year as a stock trader. He says he does not consider himself rich but much more middle class, that the "rich" are the billionaires. I reminded him that the average household income in the USA is around $50K. He said that estimate is much too low. So yes, perspective.
     
  16. CJ

    CJ Well-Known Member Admin War Zone Member

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    I personally don't think the problem is who is "rich", I think the problem is when you get to a cutoff where people start paying less effective taxes because of their income sources and/or being so rich they're able to manipulate their income without consequences to their lifestyle. Kind of the "I pay less in taxes than my secretary" problem that Warren Buffet cited.

    I'm absolutely fine paying more in taxes than someone making $45K. What I'm NOT fine with is paying more in taxes than someone who makes more than I do.
     
  17. DYohn

    DYohn Well-Known Member Donor

    Which is why I think, as stated in my original proposition, that taxes should not be set based on gross revenues, but rather on net.
     
  18. capsuleri

    capsuleri Well-Known Member

    I like DY's proposal to tax individuals on gross income minus cost of living... but the problem will be that it benefits the spenders and punishes the savers.

    Would taxing gross income for individuals on a curve with no deductions be fair? This avoids the brackets issue and keeps the progressive system in place.

    As for corporations the same system would likely discourage capital expenses such a new facilities and machinery that improves productivity and thus profits.

    Another thought - Corporations in reality do not pay taxes, they simply pass it on to their customers in their prices. There are countries like Ireland where there is no corporate tax that's why that's a tax heaven.
     
    Last edited: Nov 10, 2017
  19. DYohn

    DYohn Well-Known Member Donor

    Nothing wrong with that, in my opinion, as the spenders are adding more to the economy than a saver and paying more in total sales tax.
     
  20. DustinDavis

    DustinDavis Well-Known Member War Zone Member

    Perspective and facts and acceptance of facts. I suspect your friend is ignorant on this metric, something I’d be more willing to overlook if I didn’t also suspect it was willful.
     
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