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from the that-will-help-reduce-the-deficit,-right? dept.
The White House and congressional Republicans are finalizing a tax plan that would slash the corporate rate while likely reducing the levy for the wealthiest Americans
[...] The plan would likely cut the tax rate for the wealthiest Americans, now at 39.6 percent, to 35 percent, people familiar with the plan said Monday. They spoke on condition of anonymity ahead of a formal announcement.
In addition, the top tax for corporations would be reduced to around 20 percent from the current 35 percent, they said. It will seek to simply the tax system by reducing the number of income tax brackets from seven to three.
[...] Republican senators on opposing sides of the deficit debate have tentatively agreed on a plan for $1.5 trillion in tax cuts. That would add substantially to the debt and would enable deeper cuts to tax rates than would be allowed if Republicans followed through on earlier promises that their tax overhaul wouldn't add to the budget deficit.
https://www.apnews.com/d7929cdd15c3437db07147d219b391c4
(Score: 4, Insightful) by Anonymous Coward on Tuesday October 17 2017, @12:56PM (4 children)
That's a pretty stupid system. If you are wondering why,
1. companies pay taxes on profits, not expenses.
2. any expense that is part of normal course of business, is pre-tax (company dinners, etc. have additional considerations because these were abused by executives and owners)
3. dividend taxes have partial credits because they are taxed for entities receiving them (yes, dividends go to other companies too)
4. capital gains have nothing to do with actual companies profitability -- they are reflection of company's *net assets* (or future net assets), if anything.
5. salaries are expenses, so companies don't pay taxes on that
Companies with no tax means I could just start a company and becomes its employee. Then my wages go into that company from another company - B2B transaction. And since there is 0 tax, well, I don't pay tax. I then just pay myself whatever I need to live on and rest I can invest, pre-income tax into something else. Or it can just sit there, before income taxes. Then when I retire or quit early, I continue to take that pre-tax money out of the fake company at a rate that lowers my normal taxes.
Heck, I could make that company buy everything for me, my house could be corporate. My food could be company expense. Why pay any taxes??
And this is the primary reason why corporations MUST pay the same income taxes as regular people do. Otherwise you will get shell companies just to avoid paying taxes. And then only the poor end up paying all the taxes.
Is this clear now to you why your idea is not very smart?
Oh right... US already has a system for some. It's called Churches.
Furthermore, anytime someone bitches about "companies are paying too much income taxes so they can't employ people" -- then now you know that these people just need to be kicked in the balls because they know nothing about corporate tax accounting and how salaries are expensed.
(Score: 0) by Anonymous Coward on Tuesday October 17 2017, @01:00PM
Just to add a note, CAPITAL GAINS have nothing to do with actual companies. They are changes changes in capital between two different transactions of something. This can be turnips or Goldman Sachs stock or your car in the driveway.
(Score: 1) by khallow on Tuesday October 17 2017, @02:05PM
And there we see the fix. Spending not used for the purpose of the business is taxed as income. The internets solves another problem.
(Score: 0) by Anonymous Coward on Tuesday October 17 2017, @02:11PM
I really liked the first two thirds of your thesis, and wanted to sign up to your newsletter, the last third really blew it though. Downer.
(Score: 1, Insightful) by Anonymous Coward on Wednesday October 18 2017, @01:38AM
Any normal large company will avoid earning a profit... yet somehow they stay in business.
So a tax on profit just hurts businesses that aren't sophisticated enough to have a small army of accountants to find the loopholes. We're hurting the small and mid-size companies.