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> You pay taxes on all of your income. But businesses only pay taxes on their profit. It's a big, big difference that changes the incentives. It’d be insane to

by koolba 6y ago

> You pay taxes on all of your income. But businesses only pay taxes on their profit. It's a big, big difference that changes the incentives. It’d be insane to have it any other way for businesses. Whole swathes of low margin businesses would be impossible to operate. For example a super markets average margins are 3-5%. Corporate tax is (generally) on profits because you can deduct costs. It allows for the flow of money to efficiently find a sub supplier for the parts of a good or service. The real scam is when things like health insurance premiums are deductible for a company but not for an individual.

triceratops 6y ago
Aren't health insurance premiums deductible for individuals too?
- saddestcatever 6y ago
  "If you bought medical insurance policies on your own for yourself or your family, you might qualify for a self-employment tax deduction on the premiums." [1] "If you are enrolled in an employer-sponsored health insurance plan, your premiums may already be tax-free. If your premiums are made through a payroll deduction plan, they are likely made with pre-tax dollars, so you would not be allowed to claim a year-end tax deduction." [2] [1]: https://www.nerdwallet.com/article/taxes/self-employment-tax-deductions https://www.nerdwallet.com/article/taxes/self-employment-tax... [2]: https://www.investopedia.com/are-health-insurance-premiums-tax-deductible-4773286 https://www.investopedia.com/are-health-insurance-premiums-t...
  - triceratops 6y ago
    I'm confused. What's the difference between a "tax deduction" and paying with "pre-tax dollars"? Do they mean if for example a company pays $5000/year in employee insurance, they can subtract $5000 from their tax bill? If so, that's a tax credit right? As I understand it, a "tax deduction" is a deduction on taxable income (in the case of an individual) or profit (in the case of a company).
    - davrosthedalek 6y ago
      You are right, pre-tax dollars is the same as tax deduction. But for self-employment (the first point), there are more conditions, and people might be out of luck. For example if you could be insured by your spouse's employee based insurance, and you choose to buy your own insurance.
gen220 6y ago
> The real scam is when things like health insurance premiums are deductible for a company but not for an individual. To be fair, that this "scam" is still alive today is mostly by accident. It stems from WWII times, when stateside laborers were uniquely low in supply and high in demand, and when labor had ridiculous bargaining power. Laborers couldn't really ask for higher wages, because that was politically impossible (appearing to be extorting wartime needs for money was/is a faux pas). So companies began competing on "benefits": health, accidental death and disability insurance among them. To help ease the burden on employers and employees, the IRS allowed businesses to "temporarily" deduct insurance premiums. (This relief came against the backdrop of unprecedented wartime tax hikes). Postwar, it was unfeasible to remove this measure, as the majority of Americans who had insurance got it through their employers: it would upset both businesses who have to pay more, and employees who lose insurance. Later, some government (I forget which...) signed this stopgap measure into the tax code, making it permanent. Regardless of the interesting history, I agree with you, it should be universally deductible.
- koolba 6y ago
  > Regardless of the interesting history, I agree with you, it should be universally deductible. I’m for it being universally not deductible. Or at least not deductible for corporations. The idea is that it forces everyone onto a common public individual market as there would be no tax or cost advantage of corporations to self-insure or provide insurance. Longer term this gives better mobility to workers and lowers costs of the individual market by bringing in 100M+ healthy people (which lowers the average risk weight cost of insurance).
  - gen220 6y ago
    Interesting idea. If it were not deductible for anybody, fewer people would have health insurance. If you're in that pool, it's good for you, because it would probably be cheaper. But fewer people would be insured, so it's overall bad, right? Am I'm missing some part of your argument? The idea of making it universally deductible/subsidized for individuals seems to be the path that we're on right now. Case 1: If you purchase health insurance on the exchange, and are very poor, you can get fully-subsidized plans. (Not to mention if you qualify for medicare). Case 2: The most plausible proposals of "Medicare for All" are basically expanding the pool of people who qualify for zero-premium medicare advantage plans. This keeps insurance individualized and operated by private companies to maintain quality improvements driven by capitalistic-competition, although the government is the ultimate payer. Case 3: the government (yes, even the current administration) has taken several steps to encourage employers to subsidize the costs of employees purchasing insurance individually, rather than as a group [see https://www.takecommandhealth.com/ichra-guide https://www.takecommandhealth.com/ichra-guide].

by koolba 6y ago

triceratops 6y ago

Aren't health insurance premiums deductible for individuals too?

saddestcatever 6y ago
"If you bought medical insurance policies on your own for yourself or your family, you might qualify for a self-employment tax deduction on the premiums." [1] "If you are enrolled in an employer-sponsored health insurance plan, your premiums may already be tax-free. If your premiums are made through a payroll deduction plan, they are likely made with pre-tax dollars, so you would not be allowed to claim a year-end tax deduction." [2] [1]: https://www.nerdwallet.com/article/taxes/self-employment-tax-deductions https://www.nerdwallet.com/article/taxes/self-employment-tax... [2]: https://www.investopedia.com/are-health-insurance-premiums-tax-deductible-4773286 https://www.investopedia.com/are-health-insurance-premiums-t...
- triceratops 6y ago
  I'm confused. What's the difference between a "tax deduction" and paying with "pre-tax dollars"? Do they mean if for example a company pays $5000/year in employee insurance, they can subtract $5000 from their tax bill? If so, that's a tax credit right? As I understand it, a "tax deduction" is a deduction on taxable income (in the case of an individual) or profit (in the case of a company).
  - davrosthedalek 6y ago
    You are right, pre-tax dollars is the same as tax deduction. But for self-employment (the first point), there are more conditions, and people might be out of luck. For example if you could be insured by your spouse's employee based insurance, and you choose to buy your own insurance.

gen220 6y ago

> The real scam is when things like health insurance premiums are deductible for a company but not for an individual. To be fair, that this "scam" is still alive today is mostly by accident. It stems from WWII times, when stateside laborers were uniquely low in supply and high in demand, and when labor had ridiculous bargaining power. Laborers couldn't really ask for higher wages, because that was politically impossible (appearing to be extorting wartime needs for money was/is a faux pas). So companies began competing on "benefits": health, accidental death and disability insurance among them. To help ease the burden on employers and employees, the IRS allowed businesses to "temporarily" deduct insurance premiums. (This relief came against the backdrop of unprecedented wartime tax hikes). Postwar, it was unfeasible to remove this measure, as the majority of Americans who had insurance got it through their employers: it would upset both businesses who have to pay more, and employees who lose insurance. Later, some government (I forget which...) signed this stopgap measure into the tax code, making it permanent. Regardless of the interesting history, I agree with you, it should be universally deductible.

koolba 6y ago
> Regardless of the interesting history, I agree with you, it should be universally deductible. I’m for it being universally not deductible. Or at least not deductible for corporations. The idea is that it forces everyone onto a common public individual market as there would be no tax or cost advantage of corporations to self-insure or provide insurance. Longer term this gives better mobility to workers and lowers costs of the individual market by bringing in 100M+ healthy people (which lowers the average risk weight cost of insurance).
- gen220 6y ago
  Interesting idea. If it were not deductible for anybody, fewer people would have health insurance. If you're in that pool, it's good for you, because it would probably be cheaper. But fewer people would be insured, so it's overall bad, right? Am I'm missing some part of your argument? The idea of making it universally deductible/subsidized for individuals seems to be the path that we're on right now. Case 1: If you purchase health insurance on the exchange, and are very poor, you can get fully-subsidized plans. (Not to mention if you qualify for medicare). Case 2: The most plausible proposals of "Medicare for All" are basically expanding the pool of people who qualify for zero-premium medicare advantage plans. This keeps insurance individualized and operated by private companies to maintain quality improvements driven by capitalistic-competition, although the government is the ultimate payer. Case 3: the government (yes, even the current administration) has taken several steps to encourage employers to subsidize the costs of employees purchasing insurance individually, rather than as a group [see https://www.takecommandhealth.com/ichra-guide https://www.takecommandhealth.com/ichra-guide].