281–290 of 323 posts
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Consumption tax is very regressive. We should tax wealth, not income. Eliminate income tax and extend property tax system to all assets, not just real estate.
Well now, that's an interesting idea! Is that your idea?
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> I'm sure you agree that its not just how much your taxed on profit, but also how much profit you had to record that matters. If you're a retailer and you buy 1000 widgets at $9 and sell them at $10, then pay $350 in income tax, is your effective tax rate 35% or 3.5%? Can you see the problem if the government demanded 35% of total revenue instead of total profit? What you're no doubt complaining about is the fact th…
A more apt analogy is imagine you are selling 1000 widgets @ $10 that you bought for $9 in two different countries. One country taxes you 20% but you can't mark down the depreciation of the building you're using so you're taxed $200 of your $1000. The other country taxes you 30% but you get to mark down the $500 depreciation of the building you're using as an expense so instead you record $500 profit. Which means you…
Suppose two countries have exactly the same tax law. One of them is full of online retailers and the other is full of brick and mortar retailers. Maybe the second country has an oppressive package delivery monopoly. The brick and mortar retailers charge higher prices and have higher expenses (more employees, more real estate) and payroll and rent are deductible in both countries.
So the online retailers can make the same dollar amount of profit on lower revenue and expenses and as a result that country is considered to have a higher effective tax rate, even though their tax law is identical, because their economy is composed of a different type of companies.
And no two countries have the same economy, so you end up measuring something that can't usefully be compared with anything.
Effective tax rate as percentage of total income is a concept that originated in personal income tax, where it makes sense because the default is for expenses to not be deductible from personal income. But for business the default is the opposite. What expense is a business entity going to have that isn't a business expense? Which means that effective tax rate for a business is primarily a question of what percentage of revenue is profit.
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They're currently trying to close a couple of those loopholes here in Canada, and it's surprising how much traction the complaints against the reforms are getting. The opponents are claiming that the reforms are going to devastate family doctors and family farms. The complaints are mostly bogus, but people don't understand tax law so are vulnerable to an emotional plea.
As someone who works at a startup and has interacted with many others, there is some merit to the claims. I agree that these loopholes should be closed and the tax system reformed, but I think we should be careful to do it in such a way that doesn't negatively affect e.g. companies like the one I work for, which went from three people to 70 and millions in revenue in just a few years. Especially as Vancouver is tryin…
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People often forget about S-Corps. As the owner you W-2 yourself, then what is "left over" is a dividend. Since an S-Corp is a pass-through entity, you don't pay corporate taxes, and aren't getring the C-Corp double tax on your dividends. On the dividend, you don't end up paying toward FICA. Effectively saving you up to 15.3%. IRS rules stipulate you have to be paid a "reasonable" compensation, which most accountants…
So the average programmer US wise makes something like 90k I believe (haven't checked in a few years). You are saying if you ran a 1 man SAAS app and made 200k in a year, you would w2 yourself for 30k and take a 170k dividend? I am not sure my accountant would like this plan. Taking say that 90k or 100k might be plausible, but 30% of the average wage? (And at the 90k point.. FICA goes away past 110k anyway, so the sa…
I'm seriously considering moonlighting as a freelancer just to get access to this kind of setup. Of course, my daytime employer not having a 401k makes a big difference - with the combination of the profit-sharing and employee elective contribution, the first $22.5k annually would go directly into a tax-deferred retirement account. Partner up with different people to run unrelated businesses, and you can set up a profit-sharing plan with each to get separate "20% up to $56k/yr" buckets.
Anyhow, I'm kind of rambling. My point is that when you wear both the "employer" and "employee" hat, there's some really good options that open up that most employers don't offer because it's a wealth-transfer from employer to employee.
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We should tax consumption, not income.
If you think about it, the poorest 10 percent of society consume 100% (or more) of their income, and would pay tax on all of it. The wealthiest 1 percent might only consume 20% of their income, and would therefore be taxed at a much lower rate vs. their income.
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You lost me as soon as you said "trust me."
so how many share holder meetings have you chaired trying to save a company from going bust?
Comparing your experience chairing shareholder meetings to tax policy is apples and oranges. Specifically, that because you've chaired a shareholder meeting, this somehow makes you an expert on the efficacy and outcome of changes to the tax code.
The theory of "investment fleeing" due to capital gain tax increases is, frankly, not proven by the data. We've had an increase in the capital gains taxes under Obama (2014) - yet investment continued across private equity, venture and general investment.
Also, wealthy people are mobile, as are companies that don't have tangible assets. If you try to over-tax, they'll simply domicile everything elsewhere.
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Well now, that's an interesting idea! Is that your idea?
I guess it is. Haven't read Piketty, but from hearsay I thought he argues for wealth tax too.
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We should tax consumption, not income.
Take this example of poor people: A person earning 10k/year and a person earning 40k/year both need basically the same things: Water, shelter, food. A person earning 40k per year isn't MUCH better off than the other. They are both broke, and only have money for the necessities. But if we only tax consumption. The person earning 10k will end up spending a larger percentage of their income in taxes than their counter p…
Do you know many people with high incomes but super frugal lifestyles? If so, are they a rare counterexample, and not the norm?
Most every person I knows spends in line with income.
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A more apt analogy is imagine you are selling 1000 widgets @ $10 that you bought for $9 in two different countries. One country taxes you 20% but you can't mark down the depreciation of the building you're using so you're taxed $200 of your $1000. The other country taxes you 30% but you get to mark down the $500 depreciation of the building you're using as an expense so instead you record $500 profit. Which means you…
The problem with considering things that way is that then you can't compare countries unless they have identical economies. Suppose two countries have exactly the same tax law. One of them is full of online retailers and the other is full of brick and mortar retailers. Maybe the second country has an oppressive package delivery monopoly. The brick and mortar retailers charge higher prices and have higher expenses (mo…