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Taxing Families Like Companies

americancompass.org

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Re: Taxing Families Like Companies

#21

Post by cletus »

prepend wrote: post #2

> 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 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 individu…

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.

Re: Taxing Families Like Companies

#22

Post by erostrate »

prepend wrote: post #2

> 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 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 individu…

> 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.

Re: Taxing Families Like Companies

#23

Post by benjohnson »

bpodgursky wrote: post #16
sokoloff wrote: post #4

Of all the potential problems facing our species, running out of new people does not seem to be a concern at all. I’m not surprised that during a worldwide pandemic, our birthrate fell in a society marked by ready access to effective contraception. I don’t think it’s reasonable to draw a straight line through that and worry about declining population, but I suspect this was written to be read about as reasonably as “…

You only feel this way because you aren't paying attention to the demographics of eastern europe and east asia. If it was simply a matter of "running out of new people" it might be OK -- a gradual decrease in population of 50% over a few generation could be sustainable. That's not the issue The core problem is long lifespans creating a massively inverted age pyramid. At the extreme, the emerging pattern in urban Chin…

We have the same problem here in the US - however we papered it over with immigration.

Re: Taxing Families Like Companies

#24

Post by bradleyjg »

prepend wrote: post #2

> 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 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 individu…

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?

Re: Taxing Families Like Companies

#26

Post by fbelzile »

prepend wrote: post #2

> 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 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 individu…

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...

Re: Taxing Families Like Companies

#27

Post by irrational »

erostrate wrote: post #22
prepend wrote: post #2

> 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 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 individu…

> 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…

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?

Re: Taxing Families Like Companies

#28

Post by LocalH »

prepend wrote: post #2

> 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 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 individu…

>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.

Re: Taxing Families Like Companies

#30

Post by cletus »

zappo2938 wrote: post #13
prepend wrote: post #2

> 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 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 individu…

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.

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.

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