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>Over a reasonable horizon, you weren't profitable. The average worker isn't allowed to do that even when they lose money in a given year. Why is it so natura
by PurpleBoxDragon 8y ago
>Over a reasonable horizon, you weren't profitable.
The average worker isn't allowed to do that even when they lose money in a given year. Why is it so naturally assumed to be acceptable for a business to do it? Maybe the time is to just remove the loopholes in general from both business and personal income taxes.
- a-priori 8y agoI don't know about American taxes, but at least in Canada individuals can do this for capital gains / losses. If you have investments that produce losses one year, you can carry those losses forward to cancel out capital gains in following years and reduce your tax payable.
- lorenzhs 8y agoIn Germany, if you have less taxable income than tax deductions, you can carry that loss forward, too. It's a rare case, though, but it can save you several thousand when pursuing a second degree.
- a-priori 8y agoVery interesting. This feels like one small baby step away from a negative income tax scheme where you'd receive that difference immediately, rather than having to wait until you make more income in a later year.
- el_cujo 8y agoThis is how it works in America as well.
- andrewla 8y agoBusiness taxes and personal taxes are different. Businesses pay taxes on income, while individuals pay taxes on revenue. The differences are significant enough that any sort of parallel like this does not hold a lot of value. Yes, it might make sense to disallow this for corporations, but the justification seems reasonable -- it's not a loophole that allows corporations to take home huge amounts of money without paying taxes, it just allows them to deal with time horizons longer than one year. As it is, a gain in the second half of the first month of the year can be offset by a loss in the first half of the first month of the year, just because of reporting frequency.
- AlexTWithBeard 8y agoIndividuals pay taxes on income as well. Professional expenses are usually deductible, but most of W2 people (including myself) don't have too much to deduct.
- andrewla 8y agoI guess I should have said "businesses pay taxes on profit" instead of "income". Any expenditures that can be reasonably said to work towards the operation of the business are deductible. For individuals that is clearly not the case; things like paying for food to eat, rent, medical expenses (generally), or purchases of cars, etc., are explicitly excluded.
- objektif 8y agoIndividuals pay taxes on their own income.
- chongli 8y agoWhy is it so naturally assumed to be acceptable for a business to do it? Because a business isn't a person. Taxing a business is taking real money away from payrolls, money that would get taxed again anyway once it was paid out. Corporate income tax only makes sense when you look at it as a barrier to entry for competition in the marketplace. Big companies like Netflix know how to avoid taxes. Small companies don't. Thus corporate income taxes help to protect big companies from disruption by small ones.
- nikanj 8y agoCitizens United v FEC disagrees with you.
- deeviant 8y agoExcept a large portion of revenue does not go to workers, but to shareholders, who pay far less taxes then those who strain their backs in creating said revenue.
- spullara 8y agoFor companies like Netflix that don't pay dividends, none of it is going to shareholders.
- AjithAntony 8y agoAll of a corporations actions are to create shareholder value. Retaining earnings and investment in growth does that too. If it wasn't you'd get some activist investors rallying for a takeover. The underlying issue seems to be whether it is ethical for a business owner to make money.
- e1g 8y agoExcept for outliers like Apple, it is atypical for shareholders to get more of revenues than the workers. Payroll, benefits, offices, etc are easily >50% of revenue in virtually all ventures (including diamond trade and definitely your favourite tech unicorn)
- nsxwolf 8y agoWhat do you mean by "lose money"? There are plenty of kinds of losses that the average worker might incur that would offset their income tax. It could be a capital loss on an investment. It could be casualty losses from theft or a fire.
- MetalGuru 8y agoCasualty losses are tax deductible? That seems like it would be hard to verify if you got audited.
- Bedon292 8y agoYes, hurricanes are a big one as well. However this is un-reimbursed losses only. So if you have a large deductible, or you insurance subtracts depreciation from your payment. Then you can take a loss on just that part. But yes, need receipts and all that stuff to prove the loss. 100k house, 30k in damage, 20k insurance check. You can take 10k in losses. *Also note, I am not a CPA, consult one. This is my current understand trying to deal with a town house I own in NC that was damaged this year.
- AlexTWithBeard 8y agoAn average worker has few job-related expenses.
- pbhjpbhj 8y agoA lot of workers need a vehicle (or season pass on public transport), need a different location for their dwelling - both of these amount to a pretty hefty addition to a workers costs.
- AlexTWithBeard 8y agoCommuting is deductible - up to a certain extent: https://www.theharrisongrouponline.com/services/section-132-transportation-plans/ https://www.theharrisongrouponline.com/services/section-132-...
- isostatic 8y agoIn the UK it's determined that people commute not to get to work, but instead so they can live at a location that isn't near work. I suspect that a change to this rule would cost the Exchequer a good £20b a year plus. As a home worker I wouldn't be impressed by that.
- int_19h 8y agoEverything that is necessary for a human to function is job-related expenses for somebody who is working. We just choose to not recognize it as such.
- AlexTWithBeard 8y agoCorrect. That's what the standard deduction is for.
- ralala 8y agoBecause this rule is necessary for businesses to be able to invest on long term goals.
- OrwellianChild 8y agoIf the average worker has any stock or index fund investments, that worker absolutely can take advantage of this (in the U.S.). It's called tax-loss harvesting - worth reading about here [1]. [1] https://www.madfientist.com/tax-loss-harvesting/ https://www.madfientist.com/tax-loss-harvesting/
- anigbrowl 8y agoThere is no good reason investment income should be privileged over income from labor.
- OrwellianChild 8y agoAt risk of bottoming out on the threaded replies, I'd be interested in talking through how that would work... Let's say you wanted to give income from labor the same benefits as (negative) income from investments that lost money... How would you do that? Say I earn a healthy $250K/year at my W-2 job. If I buy a large house with the proceeds from my job, have I incurred a loss? How about if I eat out at an expensive restaurant every night, spending my entire paycheck. Do I get to avoid taxes by keeping my lifestyle expensive?
- chrischen 8y agoRegarding a house it would be considered an asset, similar to buying stock. That being said a corporatiom is not a person, and cannot eat a fancy dinner, so much of their profit can only become reinvested back into paying people who ultimately get taxed for eating fancy dinners.
- kamarg 8y agoAren't similar expenses be used by businesses? Bought an expensive building or paid for all your sales people to take clients out for dinner and drinks.
- objektif 8y agoHow is eating at an expensive restaurant a worse decision than say investing in Blue Apron? What are we trying to prove here?
- throwaway190102 8y agoIndividual workers are allowed to do this. In the form of deductions for various types of expenses such as medical and various other deductions. But it means something different to make a wage and to make a profit. There are definitely loopholes to close in our busted tax system, I agree with that 100%. While we are at it we should eliminate all subsidies for various types of carved out businesses from oil to corn. But Characterizing loss calculations as a loophole I don't think is correct. If I'm not mistaken most corporate tax schemes in the rest of the world use similar concepts, it's a fairly basic accounting concept.
- int_19h 8y ago> But it means something different to make a wage and to make a profit. Why? Other than "because our tax law says so"?
- Stratoscope 8y agoFrom 1964 to 1986, individuals were allowed to average their income over five years. (Or was it four?) Now only farmers and fishermen are allowed to do this, and some retirees who receive a lump sum retirement plan distribution.
- spikels 8y agoHow does the average worker make a loss? People are not going to be working for negative wages. Only investors or business make loses.
- prostoalex 8y agoAverage (or even above-average) W-2 worker - no, a self-employed individual or a single-person LLC - yes.
- njarboe 8y agoA huge amount of tax code complications and unfairness is due to the fact that companies get taxed on profit while people are taxed on income. People then try and have their spending done by their companies instead of personally. Mostly this is only possible for wealthy people. We should really tax companies on income to eliminate this unfixable situation. Fiddling with the tax code will not work. Personally, I would like this problem solved by a national land tax and the permanent elimination of the income tax by constitutional amendment. People trading with each other is a win/win situation. We should encourage that, not tax it.
- anonymous5133 8y agoThe reason it is like that is because the United States wants to encourage business activity in this country, so they make businesses have preferential tax systems. but I agree with your overall statements - the rates and tax system for personal individuals is ridiculous and it gets worse the more income you make. For me personally, I intentionally took a demotion (and pay cut) because it isn't worth the sacrifices you have to do to get the higher salary. More stress, more responsibility, more extra unpaid overtime you have to work, more headaches etc. SIGNIFICANTLY MORE. Then what is the reward for all this extra headaches....you get 50% of the pay raise. So I said forget about it. The extra money isn't worth it if you only keep 50%.