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Taxing Families Like Companies

americancompass.org

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Re: Taxing Families Like Companies

#71

Post by klipt »

bradleyjg wrote: post #67
klipt wrote: post #65

Earlier quoted context omitted.

If you only tax money people don't spend, i.e. only tax savings, then you discourage saving. Taxes aren't just about fairness, they're about setting the right incentives. Do you think discouraging saving is a good incentive?

I agree it would be problematic to tax savings. However, if you have a two earner household a nanny is arguably a cost of revenue. I could imagine a system that allowed cost of revenue expenses to be deducted but not, say, a trip to bora bora.

Okay, but saying there should be more tax incentives for childcare is different to saying you should be able to deduct all your workers' payroll taxes (which could equally apply to someone in a mansion whose staff includes a cook, a butler, and a pilot who flies them to Bora Bora every year).

You actually can deduct some childcare costs with a Dependent Care Flexible Savings Account. It's only up to 5k a year though which is lower than the cost of even the cheapest daycares in many areas.

Re: Taxing Families Like Companies

#72

Post by encoderer »

klipt wrote: post #68
encoderer wrote: post #64

Earlier quoted context omitted.

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.

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?

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.

Re: Taxing Families Like Companies

#73

Post by remote_phone »

We need a flat tax for everything.

The main benefit of non-flat tax is you can shape behavior by offering tax incentives. But I don’t think those work anymore. I think flat tax needs to be tried and everyone including corporations should do it.

Re: Taxing Families Like Companies

#74

Post by danenania »

slg wrote: post #41
encoderer wrote: post #15

Earlier quoted context omitted.

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 peo…

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…

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.

Re: Taxing Families Like Companies

#75

Post by LocalH »

fma wrote: post #54
LocalH wrote: post #28

Earlier quoted context omitted.

>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 sys…

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 t…

The main problem with today's society is the power imbalance. If we can solve that, we'll flourish.

Re: Taxing Families Like Companies

#76

Post by dan-robertson »

xapata wrote: post #49
dan-robertson wrote: post #36

In some sense it is reasonable to tax companies on profit rather than revenue as there are plenty of intermediaries who are good for the economy but who make tiny margins and therefore couldn’t survive if they were taxed on revenue. On the other hand, it seems there are insufficient incentives for companies to make a profit which then gets taxed rather than stashing cash in various ways or busting back stock (I think…

What's unconvincing about UBI? What'd you think of the 2020 unemployment benefits?

I think it is untenable to basically tell great swathes of the population that they are unnecessary to the economy but here’s some cash for you. I don’t think it is good for the psyche to be put in such a position. I’m sure proponents of UBI have claims that it will provide a safety net allowing people to start businesses or do what they want with their lives but I think assuming it will work for everyone is wishful thinking. I worry it would lead to a situation where the wealthy educated people living in major cities are ok and employed as before while many others are left with nothing but handouts. It’d surely be hard to build a democracy on such a divide—just look at America already.

I don’t know about the 2020 unemployment benefits as I don’t live in the US.

Re: Taxing Families Like Companies

#77

Post by LorenPechtel »

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…

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.

Re: Taxing Families Like Companies

#78

Post by LorenPechtel »

danenania wrote: post #74
slg wrote: post #41

Earlier quoted context omitted.

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…

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…

I'd abolish the standard deduction. Rather, move it into the tax brackets. At an absolute minimum the 0% bracket should extend to the poverty line, I think 150% of the poverty line would be a better fence. The standard deduction basically says you don't get to deduct many things you should be able to deduct. All the games we play with deductions are a shell game by Congress to stealthily raise taxes on the poor/middle class.

Re: Taxing Families Like Companies

#79

Post by LorenPechtel »

bradleyjg wrote: post #67
klipt wrote: post #65

Earlier quoted context omitted.

If you only tax money people don't spend, i.e. only tax savings, then you discourage saving. Taxes aren't just about fairness, they're about setting the right incentives. Do you think discouraging saving is a good incentive?

I agree it would be problematic to tax savings. However, if you have a two earner household a nanny is arguably a cost of revenue. I could imagine a system that allowed cost of revenue expenses to be deducted but not, say, a trip to bora bora.

How about domestic help/childcare/dogwalking etc is deductible up to 50% or perhaps 33% of what you would reasonably would make in the time it would take you to provide whatever service they are providing. (Divide your employment income by the hours you typically spend in a year doing that job to get an hourly rate. You can't deduct such expenses on days you aren't working except if the nature of their pay means it continues anyway. Your taking a day off work doesn't mean you get to not pay your nanny, thus that expense remains deductible.)

Re: Taxing Families Like Companies

#80

Post by LorenPechtel »

fbelzile wrote: post #26
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://ww…

McDonalds employs fewer people but now we have jobs making and maintaining that automation and those jobs pay an awful lot better than do-you-want-fries-with-that. I don't believe taxing automation is a good thing in the long run.
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