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Let's say I am in the last quarter of a tax period where I am going to have to pay taxes on a million in revenue. Now let's say that I am planning to invest in

Let's say I am in the last quarter of a tax period where I am going to have to pay taxes on a million in revenue. Now let's say that I am planning to invest in some new equipment in the next 6 months. If I buy the equipment now I don't have to pay taxes. If I wait I do. How is that not an incentive to invest? Every dollar in business expense is discounted by the amount of income tax not paid. The higher the income tax the greater the discount on business expenses and the greater the incentive to do something with cash other that hoarding it.

dmichulke 9y ago
> If I buy the equipment now I don't have to pay taxes. If I wait I do. If you wait until the next year, you'll don't have to pay the taxes next year instead of not paying them this year. But my point is about income vs sales tax: - 0 % sales tax, 10% income tax: You don't pay taxes on what you invest (assuming deduction) - 10 % sales tax, 0% income tax: You don't pay taxes on what you invest (assuming deduction) Result: You cannot claim that people are investing more just because you have income tax. You could of course assume that putting a tax on everything except investment will encourage investment. But it's the same as if you raise the price of everything except water to encourage the consumption of water. If you ask why this wouldn't work, think about how taxes affect disposable income.