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The idea of taxing corporations on the very arbitrary definition of profit is a big issue imo. It would be more accurate to tax when money changes hands going

The idea of taxing corporations on the very arbitrary definition of profit is a big issue imo. It would be more accurate to tax when money changes hands going in or out, not as a sales tax but a resource tax. This approach may decrease the need for the 50k page definition of profit vs investment. I have not given t his much thought but taxing the end state seems wishful thinking, because anyone would decrease there end state as much as possible before getting there?

cperciva 15y ago
Applying taxes every time money changes hands creates huge market distortions and gives big business a tax advantage over small businesses: Compare the tax burdens paid by a vertically integrated conglomerate which cuts down trees, converts them to lumber, builds furniture, and sells the furniture at BigCoRetail with the total taxes paid if those four steps were performed by separate logging, sawmilling, furniture-building, and retail-selling companies. Moreover, applying taxes to gross sales rather than profits eliminates some profitable business models. Suppose I can hire someone for $50 to take $49 of lumber and build $100 of furniture. I make $1 of profits and even if I pay 50% tax on my profits, everybody is still happy. But if you tax revenues, unless your tax rate is less than 1% I'll be going out of business -- at which point there is less government revenue, less value created, and Joe Carpenter has lost his job.
- whatusername 15y ago
  Doesn't a sane Sales Tax approach deal with the first issue? If I buy Lumber with a Sales Tax of $X and Sell Furniture with a higher sales tax of $Y, then I send the $Y-X in Sales Tax to the Government. (At least -- that's essentially how the GST works in Australia). BigCoRetail has better accountants and can deal with the processing more -- but the ultimate tax collected is the same.
  - cperciva 15y ago
    Yes, that's the difference between a Sales Tax and a Value Added Tax. The Australian GST (and the Canadian GST, but unlike most Canadian provincial sales taxes) is a VAT. It doesn't solve the "not profitable to hire someone to produce stuff" problem unless you count employee wages as inputs though.

cperciva 15y ago

Applying taxes every time money changes hands creates huge market distortions and gives big business a tax advantage over small businesses: Compare the tax burdens paid by a vertically integrated conglomerate which cuts down trees, converts them to lumber, builds furniture, and sells the furniture at BigCoRetail with the total taxes paid if those four steps were performed by separate logging, sawmilling, furniture-building, and retail-selling companies. Moreover, applying taxes to gross sales rather than profits eliminates some profitable business models. Suppose I can hire someone for $50 to take $49 of lumber and build $100 of furniture. I make $1 of profits and even if I pay 50% tax on my profits, everybody is still happy. But if you tax revenues, unless your tax rate is less than 1% I'll be going out of business -- at which point there is less government revenue, less value created, and Joe Carpenter has lost his job.

whatusername 15y ago
Doesn't a sane Sales Tax approach deal with the first issue? If I buy Lumber with a Sales Tax of $X and Sell Furniture with a higher sales tax of $Y, then I send the $Y-X in Sales Tax to the Government. (At least -- that's essentially how the GST works in Australia). BigCoRetail has better accountants and can deal with the processing more -- but the ultimate tax collected is the same.
- cperciva 15y ago
  Yes, that's the difference between a Sales Tax and a Value Added Tax. The Australian GST (and the Canadian GST, but unlike most Canadian provincial sales taxes) is a VAT. It doesn't solve the "not profitable to hire someone to produce stuff" problem unless you count employee wages as inputs though.