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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 li

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.
slg 6y ago
Exactly. I feel like a lot of people here either didn't pay attention to the article or are using it as an opportunity to go on a tangent about corporate/family taxes. The disconnect between the two is listed clearly in the second sentence of the article. Companies are predominately taxed on profit. Families are predominately taxed on revenue. That drastically decreases the tax burden for high revenue businesses and drastically increases the tax burden for families that are barely getting by (i.e. low profit).
- ianai 6y ago
  I agree with correcting that discrepancy - but why stop at just families? I know society loves to say it's incentivizing family building - but it also creates scenarios adverse to society. Just make the tax code treat everyone the same and tax everyone on revenue minus costs.
  - slg 6y ago
    I don't think we want that extreme either because not all costs are equal. It is entirely different equation for a family making $50k to write off their groceries versus Jeff Bezos writing off a $400m superyacht.
- stanrivers 6y ago
  This is a summary of everything - well done. Taxing profits versus taxing revenues. So deductions and whatnot complicate that slightly, but not much.
- danenania 6y ago
  The standard deduction seems like a nod in this direction. Perhaps it could be increased to be in line with the average expenses of a middle class family. Personally, I don’t think people should be paying a cent of income tax until they’re well on their way to an upper-middle class income. Taxes should always be taken out of surpluses, and never make it harder to achieve a baseline level of comfort and stability. The same should apply to new businesses—not a cent of taxes or fees until revenue is sufficient to support its owner(s), and perhaps even a few employees. If you tax something, you get less of it, so we should be very deliberate about what we’re taxing. If we tax the road to the “American dream”, a lot less people will arrive there. Whatever tax increases are required on the wealthy and larger businesses to accomplish this would be well worth it imo. A big, healthy middle class with lots of new business formation benefits everyone, including and especially the wealthy.
klipt 6y ago
> 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. That's just payroll taxes, which fund things like your nanny's social security and Medicare, and corporations have to pay them too. If the nanny was on a corporation's payroll it would cost them 70k too, so if you paid the corporation for her services, you'd still have to pay more than 70k for that corporation to make a profit.
- bradleyjg 6y ago
  No, payroll tax is a separate issue. What the grandparent post is talking about is that a company can deduct its expenses and only pay tax on net income but a family can’t. I’m not sure there’s a way to fix that—the concept of profit doesn’t really apply to a family—but it isn’t a reasonable thing to point out.
  - encoderer 6y ago
    Yes exactly. Thank you. Generally people should just assume that others with lived experience are not total idiots about it. One way to fix it is simply to let families use their SSN as the EIN for the employee, and remove that from your adjusted gross income.
    - klipt 6y ago
      So you think hiring a nanny should have special tax benefits vs e.g. paying a daycare? You realize daycares also pay the same payroll tax, should daycare patrons be able to deduct the daycare's taxes too?
      - encoderer 6y ago
        No this is just my own example. I’m sure you have some too, and it’s why the ideas in the article are powerful.
      - RhysU 6y ago
prepend 6y ago
That’s because a nanny is a luxury, not a necessity. There’s lots of people who figure it out without a nanny. There is a deduction for child care and it should be higher, but there’s no reason why your $50k nanny expenditure should be tax exempt. This is what I meant by tax policies that would favor the rich. You’re trying to figure out how to deduct a larger amount than millions of people make. That wouldn’t be fair would it? You don’t pay tax on your super cool vacation either. Even though it releases stress and is quite nice. It would be impossible to figure out a fair amount. Instead they just give a standard deduction and incentivize certain things like charities.
- moltar 6y ago
  If you look at it in the context of a company, then nanny is just an employee. If a company can have more revenue by employing a nanny then why not? It’s like saying having an office janitor is a luxury. It’s just a function, like any other, that leverages time.
  - prepend 6y ago
    And I was using it to illustrate the problem of treating individuals like corporations for this purposes. A company is not allowed to hire a nanny for an individual because it’s not essential, but an office janitor is. The difference between childcare and nanny is huge. Treating individuals like companies for tax purposes would be super regressive and a benefit to the rich that would not apply to the poor. Daycare costs $5-25k/year and that’s lots less than a nanny. Why should other taxpayers subsidize your nanny preference?
- encoderer 6y ago
  That’s one take.

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.

slg 6y ago

Exactly. I feel like a lot of people here either didn't pay attention to the article or are using it as an opportunity to go on a tangent about corporate/family taxes. The disconnect between the two is listed clearly in the second sentence of the article. Companies are predominately taxed on profit. Families are predominately taxed on revenue. That drastically decreases the tax burden for high revenue businesses and drastically increases the tax burden for families that are barely getting by (i.e. low profit).

ianai 6y ago
I agree with correcting that discrepancy - but why stop at just families? I know society loves to say it's incentivizing family building - but it also creates scenarios adverse to society. Just make the tax code treat everyone the same and tax everyone on revenue minus costs.
- slg 6y ago
  I don't think we want that extreme either because not all costs are equal. It is entirely different equation for a family making $50k to write off their groceries versus Jeff Bezos writing off a $400m superyacht.
stanrivers 6y ago
This is a summary of everything - well done. Taxing profits versus taxing revenues. So deductions and whatnot complicate that slightly, but not much.
danenania 6y ago
The standard deduction seems like a nod in this direction. Perhaps it could be increased to be in line with the average expenses of a middle class family. Personally, I don’t think people should be paying a cent of income tax until they’re well on their way to an upper-middle class income. Taxes should always be taken out of surpluses, and never make it harder to achieve a baseline level of comfort and stability. The same should apply to new businesses—not a cent of taxes or fees until revenue is sufficient to support its owner(s), and perhaps even a few employees. If you tax something, you get less of it, so we should be very deliberate about what we’re taxing. If we tax the road to the “American dream”, a lot less people will arrive there. Whatever tax increases are required on the wealthy and larger businesses to accomplish this would be well worth it imo. A big, healthy middle class with lots of new business formation benefits everyone, including and especially the wealthy.

klipt 6y ago

> 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. That's just payroll taxes, which fund things like your nanny's social security and Medicare, and corporations have to pay them too. If the nanny was on a corporation's payroll it would cost them 70k too, so if you paid the corporation for her services, you'd still have to pay more than 70k for that corporation to make a profit.

bradleyjg 6y ago
No, payroll tax is a separate issue. What the grandparent post is talking about is that a company can deduct its expenses and only pay tax on net income but a family can’t. I’m not sure there’s a way to fix that—the concept of profit doesn’t really apply to a family—but it isn’t a reasonable thing to point out.
- encoderer 6y ago
  Yes exactly. Thank you. Generally people should just assume that others with lived experience are not total idiots about it. One way to fix it is simply to let families use their SSN as the EIN for the employee, and remove that from your adjusted gross income.
  - klipt 6y ago
    So you think hiring a nanny should have special tax benefits vs e.g. paying a daycare? You realize daycares also pay the same payroll tax, should daycare patrons be able to deduct the daycare's taxes too?
    - encoderer 6y ago
      No this is just my own example. I’m sure you have some too, and it’s why the ideas in the article are powerful.
    - RhysU 6y ago

prepend 6y ago

That’s because a nanny is a luxury, not a necessity. There’s lots of people who figure it out without a nanny. There is a deduction for child care and it should be higher, but there’s no reason why your $50k nanny expenditure should be tax exempt. This is what I meant by tax policies that would favor the rich. You’re trying to figure out how to deduct a larger amount than millions of people make. That wouldn’t be fair would it? You don’t pay tax on your super cool vacation either. Even though it releases stress and is quite nice. It would be impossible to figure out a fair amount. Instead they just give a standard deduction and incentivize certain things like charities.

moltar 6y ago
If you look at it in the context of a company, then nanny is just an employee. If a company can have more revenue by employing a nanny then why not? It’s like saying having an office janitor is a luxury. It’s just a function, like any other, that leverages time.
- prepend 6y ago
  And I was using it to illustrate the problem of treating individuals like corporations for this purposes. A company is not allowed to hire a nanny for an individual because it’s not essential, but an office janitor is. The difference between childcare and nanny is huge. Treating individuals like companies for tax purposes would be super regressive and a benefit to the rich that would not apply to the poor. Daycare costs $5-25k/year and that’s lots less than a nanny. Why should other taxpayers subsidize your nanny preference?
encoderer 6y ago
That’s one take.