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This would be chaos in most industries, where margins are razor thin. And it would be a trade nightmare, as low margin industries would just move all production

by graeme 8y ago

This would be chaos in most industries, where margins are razor thin. And it would be a trade nightmare, as low margin industries would just move all production offshore. For the thin margins, imagine a company that makes 2%. But they pay 30% tax. Suddenly they’re at a loss on every sale due to tax. So thry raise price. Except every component in their chain alos does this. You’d probably also see a lot more vertical integration. No sale, no tax. Whereas separated companies have to pay tax every time thry deal withan outside company. But the world is not vertically integrated. So this tax plan wouldmforce america to drop best practices and go for extremely inefficient methods. Your plan for fairness would almost certainly destroy the economy.

dsfyu404ed 8y ago
Ok, so tax private individuals on net instead of gross then.
- mywittyname 8y ago
  Most people spend most of what they earn. The middle ground we have now is personal exemptions and the standard deduction, which gives single individuals $16,000 in Federal tax-free income. Which is fair-ish. Certainly it's more fair now than when only upper-middle class people with mortgages and high property taxes were able to itemize.
- graeme 8y ago
  You would either need to massively cut government services, or massively increase tax rates. Since only savings would be taxed, this would increase spending. In fact, you could even get the government to pay you money if you ran up extra expenses using debt and incurred a loss. There is a reason no country in the world does OP’s proposal, or yours. They would turn things topsy-turvy.
  - andrewflnr 8y ago
    > Since only savings would be taxed This seems wrong. I would think you would only be able to deduct basics like food and housing, maybe vehicles, with limits. Admittedly, that does get complicated really fast. In fact, as a pastor technically working as a contractor, my dad was able to deduct housing expenses for his whole family. It's not entirely unheard of. Also, I don't believe getting the government to pay you by deliberately incurring a loss works for business, so I don't see why it would for individuals.
    - graeme 8y ago
      You can carryforward the loss to future years to avoid taxes. You're right, it's not an instant payment, just a deferral. It would indeed be an enormously complicated system. And for what benefit? (Americans actually have one of the most deduction heavy tax systems in the world btw, including mortgage interest. In Canada we have almost no deductions of expenses from income tax. So our taxes are very simple. Complex taxes favour the rich, and require auditors)
leepowers 8y ago
It might work. B&O taxes are taken out of gross income, but no where near 30%: https://en.wikipedia.org/wiki/Business_and_occupation_tax#Major_B_&_O_Classifications_and_their_tax_rates https://en.wikipedia.org/wiki/Business_and_occupation_tax#Ma... So a federal B&O scheme might work if the rate was low enough. Auditing a business would be massively simplified, no need to carefully check expenses and write-offs to calculate net income. Compliance would be much easier. The question is would gross income taxation create a bigger pie, and would that pie be big enough that a low rate would substantially tax revenues.

by graeme 8y ago

dsfyu404ed 8y ago

Ok, so tax private individuals on net instead of gross then.

mywittyname 8y ago
Most people spend most of what they earn. The middle ground we have now is personal exemptions and the standard deduction, which gives single individuals $16,000 in Federal tax-free income. Which is fair-ish. Certainly it's more fair now than when only upper-middle class people with mortgages and high property taxes were able to itemize.
graeme 8y ago
You would either need to massively cut government services, or massively increase tax rates. Since only savings would be taxed, this would increase spending. In fact, you could even get the government to pay you money if you ran up extra expenses using debt and incurred a loss. There is a reason no country in the world does OP’s proposal, or yours. They would turn things topsy-turvy.
- andrewflnr 8y ago
  > Since only savings would be taxed This seems wrong. I would think you would only be able to deduct basics like food and housing, maybe vehicles, with limits. Admittedly, that does get complicated really fast. In fact, as a pastor technically working as a contractor, my dad was able to deduct housing expenses for his whole family. It's not entirely unheard of. Also, I don't believe getting the government to pay you by deliberately incurring a loss works for business, so I don't see why it would for individuals.
  - graeme 8y ago
    You can carryforward the loss to future years to avoid taxes. You're right, it's not an instant payment, just a deferral. It would indeed be an enormously complicated system. And for what benefit? (Americans actually have one of the most deduction heavy tax systems in the world btw, including mortgage interest. In Canada we have almost no deductions of expenses from income tax. So our taxes are very simple. Complex taxes favour the rich, and require auditors)

leepowers 8y ago

It might work. B&O taxes are taken out of gross income, but no where near 30%: https://en.wikipedia.org/wiki/Business_and_occupation_tax#Major_B_&_O_Classifications_and_their_tax_rates https://en.wikipedia.org/wiki/Business_and_occupation_tax#Ma... So a federal B&O scheme might work if the rate was low enough. Auditing a business would be massively simplified, no need to carefully check expenses and write-offs to calculate net income. Compliance would be much easier. The question is would gross income taxation create a bigger pie, and would that pie be big enough that a low rate would substantially tax revenues.