Load up your flamethrowers...taxing revenue, not profits

[John Ranalletta]

Why is it a business, regardless of size, is taxed on profits and not revenues?  Most wage earners have taxes deducted from wages when paid.

 

Most businesses will use water, sewage, electricity and pay rent.  No one complains about paying for those services on a nearly-COD basis.

 

Why not tax top line revenue like utilities to pay for government services?  Tax revenues would ebb and flow with the economic cycle.

 

One benefit: All the tax lawyers and accountants find other occupations. 

[Skywagon]

No flames...but something to think about.  How many small businesses, restaurants, etc make zero profit for a couple of years?  It might put even more strain on anything but large business if you tax on revenue vs. profit.

 

When I was younger, I was stupid enough to build a steak house with a partner using our cash.  We owned it for a little over 2 years while it hemorrhaged cash.  We knew we could break even or slightly better if we sold it.  We did sell, recover our losses, turned a small profit...very small.  Our income on the restaurant was about $800k/year.  If we paid taxes at the revenue level it would never had a chance.  The new owners ran it almost 10 years and eventually closed it down.

 

I am not in favor of all the deductions and tax exemptions.  We do need to raise revenue.  Raising revenue also hikes inflation....It's good to be retired now.  No thinking required.

[John Ranalletta]

There'd be bumps, for sure.

Under a revenue tax scheme, the rate would likely be much lower.  Even at a much lower, flat rate, say 3%, big, tax-avoiding entities e.g. Amazon, Google, Apple, ($1.08 trillion) would pay much more than they presently pay via tax dodges and offshoring of profits.

 

"According to data from the U.S. Bureau of Labor Statistics, about 20% of U.S. small businesses fail within the first year. By the end of their fifth year, roughly 50% have faltered. After 10 years, only around a third of businesses have survived." How many of these businesses should never have been attempted?  Don't know, but a 3% tax on revenue likely wouldn't materially boost these numbers IMO.

[szurszewski]

I started a business in 2011 - we did about $100k in revenue the first year at a slight loss and with a few years were up to a million a year … but only at a slight profit. Like, really slight. Even 3% of that total revenue would have wiped out the profit entirely and the rest would have come out of the owners’ salaries (which were barely above minimum wage that year - way less, of course, if you calculated it by the hour!). 

 

I do get what you’re saying though - I live in the PNW and the amount of taxes amazon pays (or rather, the amount they don’t) is a big hot-button issue here. Even a tiny fraction of their overall revenue would be a boon. But it would probably also get them to move HQ overseas (or offworld!) ASAP. 

[fourteenfour]

Considering that businesses like the big grocery chains rarely see even three percent net all a revenue tax does is drive businesses away.

[John Ranalletta]

I guess what it comes down to is this:  a company, large or small can operate using municipal, county, state and federal services for free if they can avoid paying taxes; but it isn't free, the burden is shifted (usually) to private citizens.

[Skywagon]

1 hour ago, John Ranalletta said:

it isn't free

 

I have a mug they gave us stupid finance graduates as we walked across the stage.  All it says is TINSTAAFL  The point of the business school dean was work is required.

 

I use it often and pronounce it as Tin Staf ul.  Take a guess what it stands for.

[Scott9999]

Businesses, particularly the dominate kind, small business need capital to start up, and survive.  Some businesses need more capital that others, both to start up and just survive.  Business are owned and staffed by Taxpayers, who pay for all those "infrastructure" thingys the OP is concerned about.   In fact, both labor, capital, and profits are usually taxed multiple times for the same resource & product.   100% of the risk is absorbed by the owners.  0% risk is absorbed by the government.   

 

They aren't operating for "free".  They are paying their "fair share", IF the business can operate successfully with a profit.

 

As far as business tax loopholes, that's a natural result of a combination of over-taxation and corrupt politicians.    To level the playing field and stop the corrupt loopholes, eliminate taxation on ALL income, Constitutionally - i.e. permanently.   Create a uniform sales or VAT tax.  Tax everything once based on consumption.  Don't punish revenue, profits, capital, OR labor.   

 

The reason that this simple formula can't be accomplished is (a) corrupt politicians would have no way to leverage the tax code(s) across America to reward their personal fortunes and achieve greater political influence, and (b) the American people will never trust the politicians to honestly implement such a system.  Taxpayers have seen repeated taxation corruption from their government, e.g. retroactive tax increases, taxes that punish one taxpayer while rewarding others, and so forth.  One example is Proposition 13 in California.  It's a terrible tax policy, and regressive as all heck, since property owned for longer periods by wealthier Americans see little to no increase, while property sold recently (usually purchased by much less wealthy Americans), bears the greatest tax burden.  California taxpayers were made a promise concerning future property taxation NOT taxing them out of their homes.  Yet, even though they were promised a 1% rate cap, every property taxpayer is paying more than that, due to "add on" tax "user" fees.  Plus, prop 13 does allow assessor re-appraisals and tax increases, limited to a certain percentage.   The point is, just as soon as American's agree to a "flat tax" on consumption, history tells them the politicians will find ways to circumvent the Constitutional amendment, and add income and other taxes right back into the tax code.   Moreover, as soon as anyone seriously suggests a consumption-only based tax plan, they are demagogued politically.   There are just too many rice bowls benefiting from the tax status quo.

 

Almost ANY ILL in American has it's root in government intervention in the USA's so-called, "market economy".  We don't have a market based, capitalist economy.  We have a hybrid, socialist leaning economic system, with HEAVY government intervention warping every business and personal economic decision in America.   

 

Finally, NO PROBLEM in American is due to inadequate tax revenue.  The failure to properly budget, the massive corruption in tax revenue distribution, the inflation spiking deficit spending (at all levels of government), results in from 1 cent to perhaps no higher than 10 cents spent actually producing a government benefit for the American people, while 90+ cents on our tax dollars, goes to fraud, waste, and pure abuse.  

[John Ranalletta]

10 hours ago, Skywagon said:

 

I have a mug they gave us stupid finance graduates as we walked across the stage.  All it says is TINSTAAFL  The point of the business school dean was work is required.

 

I use it often and pronounce it as Tin Staf ul.  Take a guess what it stands for.

I'm guessing "free lunch" is in there somewhere...

[John Ranalletta]

11 hours ago, Scott9999 said:

Businesses, particularly the dominate kind, small business need capital to start up, and survive.  Some businesses need more capital that others, both to start up and just survive.  Business are owned and staffed by Taxpayers, who pay for all those "infrastructure" thingys the OP is concerned about.   In fact, both labor, capital, and profits are usually taxed multiple times for the same resource & product.   100% of the risk is absorbed by the owners.  0% risk is absorbed by the government.   

 

They aren't operating for "free".  They are paying their "fair share", IF the business can operate successfully with a profit.

 

As far as business tax loopholes, that's a natural result of a combination of over-taxation and corrupt politicians.    To level the playing field and stop the corrupt loopholes, eliminate taxation on ALL income, Constitutionally - i.e. permanently.   Create a uniform sales or VAT tax.  Tax everything once based on consumption.  Don't punish revenue, profits, capital, OR labor.   

 

The reason that this simple formula can't be accomplished is (a) corrupt politicians would have no way to leverage the tax code(s) across America to reward their personal fortunes and achieve greater political influence, and (b) the American people will never trust the politicians to honestly implement such a system.  Taxpayers have seen repeated taxation corruption from their government, e.g. retroactive tax increases, taxes that punish one taxpayer while rewarding others, and so forth.  One example is Proposition 13 in California.  It's a terrible tax policy, and regressive as all heck, since property owned for longer periods by wealthier Americans see little to no increase, while property sold recently (usually purchased by much less wealthy Americans), bears the greatest tax burden.  California taxpayers were made a promise concerning future property taxation NOT taxing them out of their homes.  Yet, even though they were promised a 1% rate cap, every property taxpayer is paying more than that, due to "add on" tax "user" fees.  Plus, prop 13 does allow assessor re-appraisals and tax increases, limited to a certain percentage.   The point is, just as soon as American's agree to a "flat tax" on consumption, history tells them the politicians will find ways to circumvent the Constitutional amendment, and add income and other taxes right back into the tax code.   Moreover, as soon as anyone seriously suggests a consumption-only based tax plan, they are demagogued politically.   There are just too many rice bowls benefiting from the tax status quo.

 

Almost ANY ILL in American has it's root in government intervention in the USA's so-called, "market economy".  We don't have a market based, capitalist economy.  We have a hybrid, socialist leaning economic system, with HEAVY government intervention warping every business and personal economic decision in America.   

 

Finally, NO PROBLEM in American is due to inadequate tax revenue.  The failure to properly budget, the massive corruption in tax revenue distribution, the inflation spiking deficit spending (at all levels of government), results in from 1 cent to perhaps no higher than 10 cents spent actually producing a government benefit for the American people, while 90+ cents on our tax dollars, goes to fraud, waste, and pure abuse.  

 

"They aren't operating for "free".  They are paying their "fair share", IF the business can operate successfully with a profit."

 

Maybe.  If you're knitting socks in your basement and selling them on Etsy, I agree; however, when a LLC, LP, sub S or S corp is born, it's an entity separate from its owner. 

[beemerboy]

14 hours ago, John Ranalletta said:

I'm guessing "free lunch" is in there somewhere...

As my dear departed father used to say to me, "Son, wish in one hand and shit in the other and tell me which one fills up faster." Words of wisdom from Dad. I'm not trying to be funny nor flippant here gang, but those words haven't left me since he spoke them sometime in the late 1960's.

 

By the way, this is coming from a former corporate wonk who's been a small business owner for six years. One thing not mentioned here is the hours it takes to run your own business.....too had that isn't factored into the gubmint tax equation. 

[realshelby]

I am a business owner. I don't see where government regulation or taxes is a problem to my or about any other business. Simply an excuse for a poor business model. In past discussions I have always taken the "tax everything exactly the same". No loopholes. No free taxes for 10 years. No deductions. Simple 1% or whatever is proper. 

 

Some business models begin with "where can we get complete tax exemption?"

 

If you cannot make a profit, you must raise your income without raising cost. Yes, the customer has to pay more. Paying employees less often backfires. As an owner...well there are times you are working in your sleep. Just how it is. But the rest must be made to work on merit. 

 

Have not seen anyone boycott grocery stores! They have raised prices a lot. They are still in business and I can tell you from direct input that they are making significant profit compared to recent years. Automotive industry has lower sales....yet profits are in pretty good shape. 

 

There will always be venture capital for business to ask for. Let them take the chance rather than government.