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Taxing revenues instead of profits would privilege high margin businesses over low margin ones which would implicitly mean that customers would pay a much highe

by harryh 11y ago

Taxing revenues instead of profits would privilege high margin businesses over low margin ones which would implicitly mean that customers would pay a much higher tax rate on their groceries than on an iPhone. Literally no one thinks that would be a good idea.

TheCoelacanth 11y ago
I wasn't saying that businesses should be taxed on their revenues. I was asking why natural persons are taxed on their revenue.
- Zigurd 11y ago
  In theory, things like EITC and progressive rates should account for the fact that low income people spend all their income on living, while high-income people accumulate capital that they can invest and create more income. Also, in theory, this approach is less intrusive than asking people to account for their spending and try to find which spending is actually a "cost" the way it would be for a business, and what it some frippery that should (for some definition of "should") be taxed.
- rayiner 11y ago
  The orthodox explanation is that with individuals, it is very difficult to distinguish between consumption and expenses incurred for the purposes of producing income. A business entity gets to deduct everything necessary to its upkeep because it exists solely for the purpose of producing income. A person, on the other hand, does not. Some part of what you spend on housing is attributable to your need to be near work, etc, but you have an interest in securing shelter for reasons that have nothing to do with your work. As a practical matter, individuals do mostly get to offset the costs of producing income. Individuals who own houses effectively get to deduct the cost of housing through the mortgage interest deduction. Individuals who don't own their own house probably don't itemize either, and get the standard deduction. At $12,000 for a family, it probably a reasonable proxy for the component of living expenses attributable to the need to work to produce income. There are some obvious gaps, child care being the main one, which is almost entirely attributable to working rather than consumptive.

by harryh 11y ago

TheCoelacanth 11y ago

I wasn't saying that businesses should be taxed on their revenues. I was asking why natural persons are taxed on their revenue.

Zigurd 11y ago
In theory, things like EITC and progressive rates should account for the fact that low income people spend all their income on living, while high-income people accumulate capital that they can invest and create more income. Also, in theory, this approach is less intrusive than asking people to account for their spending and try to find which spending is actually a "cost" the way it would be for a business, and what it some frippery that should (for some definition of "should") be taxed.
rayiner 11y ago
The orthodox explanation is that with individuals, it is very difficult to distinguish between consumption and expenses incurred for the purposes of producing income. A business entity gets to deduct everything necessary to its upkeep because it exists solely for the purpose of producing income. A person, on the other hand, does not. Some part of what you spend on housing is attributable to your need to be near work, etc, but you have an interest in securing shelter for reasons that have nothing to do with your work. As a practical matter, individuals do mostly get to offset the costs of producing income. Individuals who own houses effectively get to deduct the cost of housing through the mortgage interest deduction. Individuals who don't own their own house probably don't itemize either, and get the standard deduction. At $12,000 for a family, it probably a reasonable proxy for the component of living expenses attributable to the need to work to produce income. There are some obvious gaps, child care being the main one, which is almost entirely attributable to working rather than consumptive.