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> As a result, families pay a disproportionate share of federal tax receipts This is simply because companies pay money to individuals who then pay taxes. This

• zappo2938 6y ago
  This article is another conservative puff piece that doesn't belong on Hacker News. They are pushing for a flat tax which is a regressive tax.
  • benjohnson 6y ago
    Combined with UBI, it could have merit. However the combination will never happen as it doesn’t allow politicians to play favorites and reward their buddies.
  • cletus 6y ago
    A flat tax with an tax free income threshold would actually be great. For example: - Exclude the first $50,000 - Tax the rest at 25% - Eliminate deductions (this will never happen). This includes the standard deduction. - Make efforts to also stop companies to shift profits to low or no tax jurisdictions. - Get rid of double taxation on dividends. And we'd all be a lot better off.
  • mooreds 6y ago
    I don't think the flat tax is a good idea, but I would love a simpler tax code. But I remember having a long conversation with a friend who was an economist on why corporations were able to deduct things they needed to provide their services, but I as an individual couldn't do the same. It's a valid and interesting topic to discuss, imo.
  • RhysU 6y ago
    How is a flat tax regressive? How far from flat does it have to be to stop being regressive?
• encoderer 6y ago
  You’re talking about why we can’t treat corporations like families with higher tax rates. To me the more interesting question is more about treating families like corporations. We had a nanny for a year. She made about $50k, but I had to pay her with after-tax income so the actual cost of the nanny was closer to $70k of my pretax income. This is the precise double taxation you’re talking about. Yes, higher income people have more deductions, but that’s what AMT is for.
  • xapata 6y ago
    What if you don't earn income, would you say that the nanny's wage is lower?
    • slg 6y ago
      Money doesn't magically appear. The money was earned at some point and likely went through some type of income or estate tax.
      • xapata 6y ago
        Fair. However, because marginal rate differs by year, now we need to know what year's money that nanny's wage is being paid out of to make that 50 vs 70 calculation.
        • encoderer 6y ago
          This is a solved problem called accrual accounting.
          • xapata 6y ago
            I'm not familiar with that. Sounds like more complexity for my taxes. I'd rather things get simpler. My proposal is a flat federal value-added tax, its revenue distributed weekly in uniform amounts to each domestically-residing citizen's federal debit card account.
  • 6y ago
• cletus 6y ago
  So this is wrong on several fronts. First, taxing companies is not "double taxation". Companies are taxed on profits. Paying taxes on behalf of employees and paying taxes on profits are mutually exclusive. Second, not taxing companies allows the rich to disproportionately avoid paying any taxes. Person A earns $50,000pa and gets taxed on all of it. Person B earns $5m but is paid through a company but "only" spends $1m/year. So $1m is distributed as effectively as possible through dividends and income and the rest taxed as profits, deferring a portion of their taxes possibly indefinitely. But it gets worse: getting paid in a company now allows the person to take advantage of transfer pricing and shift profits (and thus any corporate taxes) to a low or zero tax jurisdiction. And it doesn't end there. Instead of distributing income, the company borrows against those profits and distributes that. Loan interest is near zero so this also defers taxes, possibly indefinitely. Some argue it's inefficient to tax companies and we should just tax individuals. The flaw should be clear: at best, for the rich who have this option, you're now taxing their spending instead of their earnings (ie distribute what you need to spend, retain the rest as undistributed profits). I'm a big fan taxing profits based on revenue, which is to say that if 60% of a company's revenues are sourced in the US, then the US gets to tax 60% of your profits. And I'm completely fine with every country doing this if they want.
  • prepend 6y ago
    I was comparing the issue of taxing companies on revenue instead of profits, like individuals are taxed on income instead of profits. The current way is done to prevent double taxation.
• erostrate 6y ago
  > This is simply because companies pay money to individuals who then pay taxes. This is a feature not a bug as taxing companies is less efficient from just having employee pay as a deduction that gets taxed downstream. So if a company has a large revenue that it mostly reinvests and pays low salaries, very little tax would be paid on this revenue, and that seems okay to you? > People who complain about “companies not paying taxes” are like the “47% don’t pay taxes” people in that they don’t understand the principles behind taxation very well Are you sure about that? Amazon paid a federal income tax of 1.2% in 2019 on 13B of U.S. income. I think this is what people complain about when they talk about companies not paying taxes.
  • irrational 6y ago
    13B in revenue or profit? That is, after paying their employees, the cost of buildings and equipment, capital costs, etc. how much was left over? What percentage of that did they pay in taxes?
    • akiselev 6y ago
      Are you suggesting that Amazon's revenue from customers in the United States was $13 billion in all of 2019? That's a fraction of AWS revenue, let alone their retail business.
      • irrational 6y ago
        How should I know? It could be anywhere between $13 million and $13 trillion for all I know. I’m not even sure how much I have in my own bank account.
  • prepend 6y ago
    > So if a company has a large revenue that it mostly reinvests and pays low salaries, very little tax would be paid on this revenue, and that seems okay to you? Certainly, of course. If they reinvest then they are spending capital on something so that company so taxes are eventually paid. This is meant, I think, to encourage growth with the intent that there will be an eventual taxable event at a higher amount than if tax was paid earlier in the stream. I think this is why tax revenues continue to grow. The intent is to maximize tax revenue. There’s no reason to worry about companies like in your scenario because it doesn’t negatively impact taxes. What might be good is to setup thresholds for deductible expenses to prevent corporate expense that are clearly luxuries. For example, meals are only 50% deductible. I could see setting up different classifications for private jets over commercial, country club dues, luxury hotels, etc. It doesn’t seem fair that taxpayers subsidize corporations claiming expenses and offsetting taxes on country club dues and whatnot. Pretty bizarre and there are lots of setasides that clearly benefit rich people who work for corporations.
• bradleyjg 6y ago
  Don’t non-US national owners of companies doing business in the United States benefit from goods and services provided by US governments? Ought they contribute? How do you tax them if the system only taxes individuals?
• fbelzile 6y ago
  I think a big problem is that the number of employees required to run many types of businesses has been steadily decreasing over time as technology improves. McDonald's for example went from 440,000 employees to 205,000 from 2012 to 2019 [1]. Multiply that out to include manufacturing companies and it's pretty easy to find the reason governments are strapped for cash. Maybe it's time to tax automation? [1] https://www.statista.com/statistics/819966/mcdonald-s-number-of-employees/ https://www.statista.com/statistics/819966/mcdonald-s-number...
  • mikepurvis 6y ago
    > Maybe it's time to tax automation? 1000% yes; I work in industrial mobile robots and it's obvious that governments need to find a way to capture some of the value which is being created there, particular when it's a more-or-less direct trade of a wage-earning employee for a one-off capital investment. Are there are any major proposals yet for how this might work, or has already worked? The "existing" section on this suspiciously-OR Wikipedia article is pretty scant: https://en.wikipedia.org/wiki/Robot_tax#Existing_laws https://en.wikipedia.org/wiki/Robot_tax#Existing_laws
    • TeMPOraL 6y ago
      > Are there are any major proposals yet for how this might work, or has already worked? I don't know of any direct proposals, but I know of one thought: if you look at it, tax on fuels is partially a tax on automation already - machines use energy (be it electricity, heat or pressure), so there's a tax here that is proportional to use of machines. Of course it seems very low if treated as "tax on automation", and it's going to be easy to work around with off-the-grid, local power generation.
      • mikepurvis 6y ago
        Interesting idea, but I don't think that's a realistic proxy, particularly when you look at the automation-per-dollar "efficiency" of computers relative to other industrial processes— like, how much compute do you get for the power that it takes to boil water or weld together a car or something? Or what about a case like a self-serve till at the grocery store? The power those consume is probably actually comparable to the power consumed by a till with a person operating it. There are good reasons to tax energy and carbon, but critics are right that it ultimately is a tax on everything. An automation tax needs to find a way to specifically tax the gains made by putting humans out of a job, similar to what organized labour achieved for a generation of longshoreman when containerization killed their industry in the 60s and 70s (as documented in Marc Levinson's excellent book The Box).
• LocalH 6y ago
  >This is a feature not a bug as taxing companies is less efficient from just having employee pay as a deduction that gets taxed downstream. Trying to tax this money before it gets to employees would result in double taxation as the company would pay and the individual would then pay again. So the corporation gets to enjoy low tax obligation, and push that obligation onto their employees. And that's a feature? The system is truly fucked.
  • fma 6y ago
    Yep....the claim is companies create jobs thus should have tax benefits. But I'm pretty sure the only reason that company can create job is because I purchased items from them. If a company creates jobs because good/services were purchased, then why not empower the purchaser with more purchasing power? In a supply/demand economy, the supply side is reaping the benefits...if you give benefits to the demand side then that's labeled as making people lazy LOL. 70% of the GPD is driven by personal consumption but we're often told that we are meaningless to the economy and should give tax benefits to companies to "create" jobs. (https://www.thebalance.com/personal-consumption-expenditures-3306107 https://www.thebalance.com/personal-consumption-expenditures...)
    • LocalH 6y ago
      The main problem with today's society is the power imbalance. If we can solve that, we'll flourish.
  • prepend 6y ago
    Companies are owned by people. The idea is companies push all profits to shareholders and employees. It’s fucked that people don’t understand this and think that taxing companies is somehow different than taxing people. As long as taxes are paid the calculus should be in what’s most efficient. I don’t care if the company pays it directly or indirectly through people. What’s actually stupid is that dividends are taxable. Since they are after tax the company pays taxes, sends the remaining money to shareholders as dividends. Then then the dividends are taxed at the individual level. What’s even stupider is that is a company is a shareholder. It pays taxes on that dividend income, then distributes to shareholders. It’s not the system that’s fucked, it’s your understanding of the principles of the system. I suggest a microeconomics 101 MOOC.
• dalbasal 6y ago
  >People who complain about “companies not paying taxes...” don’t understand the principles behind taxation very well It's true that people don't understand the principles or details very well, but it's also true that the principles are just a starting point on a convoluted road to a working understanding. Corporate income taxes are paid on profits. Individual income tax is on revenue. That's the principle. Square that principle with the amount of tax paid over time by the most profitable companies, say amazon. Square the idea of individual income tax with the actual amount paid by Bezos.
  • xapata 6y ago
    Wealth is different from income.
• hshshs2 6y ago
  >Trying to tax this money before it gets to employees would result in double taxation as the company would pay and the individual would then pay again. The author specifically said that they don’t think that’s the answer
• LorenPechtel 6y ago
  And note that taxing companies is inherently a regressive tax. America would be better served by abolishing corporate tax entirely. On the individual side I would expand schedule C to all income-producing activities--what it cost to make the money comes off the top rather than the current mess (especially as unreimbursed business expense isn't even deductible at present.) This would include all hobby activities, the only difference being a zero floor for hobby "income"--you can't write off hobby losses against other income. Obviously, individual tax rates would have to go up, but so long as it was revenue neutral I think America would benefit.