The average worker isn't allowed to do that even when they lose money in a given year. Why is it so naturally assumed to be acceptable for a business to do it? Maybe the time is to just remove the loopholes in general from both business and personal income taxes.

[1] https://www.madfientist.com/tax-loss-harvesting/

That is laughably small.

And you can't deduct the losses from your other income while you can as a business.

Example, in year 1 you have a $15,000 net capital loss. You write off the maximum $3,000 of this against your other income, carrying over a $12,000 capital loss. In year 2 you have a $10,000 net capital gain, this is offset against your carried over loss leaving $2,000 to write off against your income.

Of course, there's a political component of it too - taxes are always political, and are used to promote or suppress certain actions. I guess the government does want to promote long-term investment and thus defines lower tax rates for this activity.

Also there is plenty of business income that is not double taxed because it isn't run through a C Corp.

Then in regards to incentives. We already have interest rates to adjust the knobs of investment versus consumption. Capital gains is just a way to make the tax system less progressive.

However, once you earned enough money, beyond subsistence level, you have a choice - you can spend it all on consumption, or you can defer some of the consumption, or give up a part of it, as an investment, in hope that this would increase your consumption abilities in the future, or you ability to retire, etc. Modern economy would not work without investment - you need massive upfront spending to lift off something like Netflix of the ground, before it starts being profitable.

This investment is, ultimately, financed by people who chose investment over consumption (might be one very rich person, or tens of thousands of not so rich people giving their money to the bank, which in turn loans it to the entrepreneurs, or likely a mix of both). Ensuring this choice remains a viable and attractive one is something that the government would definitely have an incentive to support.

Moving onto more statistical approach, this one: https://www.fa-mag.com/news/most-millionaires-self-made--stu... says only 8% of millionaires inherited their wealth. For billionaires, according to this: https://www.entrepreneur.com/article/269593 18% got a jump-start (maybe parents were mere millionaires, but the child became a billionaire), and 62% are self-made. So inheritance effects exist, but maybe they are not that huge? At least, clearly, not a majority.

Of course, not everybody starts in the same place. But human behavior and motivations are similar, and thus you can reason about them despite the differences.

Also, realize that the government does promote both labor and investments, just through different means. Lowering taxes isn't going to affect how a fully employed individual produces labor; they are trading their time for money. Lowering taxes on investment will promote more investments, since the money for those investments have already been taxed, and since the trade of investments is money-now for money-later, taxes have a much more significant influence over the extent to which someone will invest in a business. Someone fully invested in other things (non-stock commodities, etc) might move some of their investments into businesses instead.

Let's say you wanted to give income from labor the same benefits as (negative) income from investments that lost money... How would you do that?

Say I earn a healthy $250K/year at my W-2 job. If I buy a large house with the proceeds from my job, have I incurred a loss? How about if I eat out at an expensive restaurant every night, spending my entire paycheck. Do I get to avoid taxes by keeping my lifestyle expensive?

That being said a corporatiom is not a person, and cannot eat a fancy dinner, so much of their profit can only become reinvested back into paying people who ultimately get taxed for eating fancy dinners.

I am not all that sure about carrying forward investment losses, and as you are aware some expenses are deductible while some are not. While eating a fancy restaurant is strictly optional, spending on medical of educational costs are quite different.

In general I think if someone investigates the edge cases first (eg looking at the second-order effect like carrying deductions on negative income) that's a sign of not wanting to look at the larger picture.

As you indicated above, so much of our personal expenses are "discretionary" in the sense that we could increase or lower them by choice. That's exactly the difference between business investment spending (required to produce the revenue that's taxed) vs. personal income/spending, which is based strongly on preferences. Hard to justify taxing frugal individuals more than lavish spenders just because they save a larger percentage of their income...

It's available through archive.org https://archive.org/stream/galaxymagazine-1954-04/Galaxy_195...

The lenient rates were introduced during high-inflation years. If somebody was pursuing a long-term project spanning over several years (let's say, building a new apartment complex), high punitive tax rates at liquidity time (let's say, 5 years down the road) combined with decreased buying would obliterate any real profitability.

The 12-month cut-off window, though, seems completely arbitrary.

The argument is kinda moot anyways, as capital gains are completely voluntary - one sells when they want to sell. If they don't want to sell, but need liquidity, they can access a bunch of asset-backed loans (HELOCs, PALs, cashout refinance, etc.) Ken Fisher in his book "Debunkery" (and I'm sure the data exists elsewhere) shows how total revenue figures collected by US government do not change over decades, regardless of the actual capital gains rates.

I am not sure what the counter-argument to that is, but one thing I can think of is increased complexity of a tax return for an average joe investor, who bought and sold a few funds in his portfolio. Opponents will also likely point that an official measure - CPI - can be manipulated for political purposes.

Love it when people shoot down proposals I never made

we don't

The differences are significant enough that any sort of parallel like this does not hold a lot of value. Yes, it might make sense to disallow this for corporations, but the justification seems reasonable -- it's not a loophole that allows corporations to take home huge amounts of money without paying taxes, it just allows them to deal with time horizons longer than one year. As it is, a gain in the second half of the first month of the year can be offset by a loss in the first half of the first month of the year, just because of reporting frequency.

Professional expenses are usually deductible, but most of W2 people (including myself) don't have too much to deduct.

Now only farmers and fishermen are allowed to do this, and some retirees who receive a lump sum retirement plan distribution.

100k house, 30k in damage, 20k insurance check. You can take 10k in losses.

*Also note, I am not a CPA, consult one. This is my current understand trying to deal with a town house I own in NC that was damaged this year.

If you have investments that produce losses one year, you can carry those losses forward to cancel out capital gains in following years and reduce your tax payable.

But it means something different to make a wage and to make a profit. There are definitely loopholes to close in our busted tax system, I agree with that 100%. While we are at it we should eliminate all subsidies for various types of carved out businesses from oil to corn. But Characterizing loss calculations as a loophole I don't think is correct. If I'm not mistaken most corporate tax schemes in the rest of the world use similar concepts, it's a fairly basic accounting concept.

Why? Other than "because our tax law says so"?

but I agree with your overall statements - the rates and tax system for personal individuals is ridiculous and it gets worse the more income you make. For me personally, I intentionally took a demotion (and pay cut) because it isn't worth the sacrifices you have to do to get the higher salary. More stress, more responsibility, more extra unpaid overtime you have to work, more headaches etc. SIGNIFICANTLY MORE. Then what is the reward for all this extra headaches....you get 50% of the pay raise. So I said forget about it. The extra money isn't worth it if you only keep 50%.

I suspect that a change to this rule would cost the Exchequer a good £20b a year plus. As a home worker I wouldn't be impressed by that.

We should really tax companies on income to eliminate this unfixable situation. Fiddling with the tax code will not work. Personally, I would like this problem solved by a national land tax and the permanent elimination of the income tax by constitutional amendment. People trading with each other is a win/win situation. We should encourage that, not tax it.

Because a business isn't a person. Taxing a business is taking real money away from payrolls, money that would get taxed again anyway once it was paid out.

Corporate income tax only makes sense when you look at it as a barrier to entry for competition in the marketplace. Big companies like Netflix know how to avoid taxes. Small companies don't. Thus corporate income taxes help to protect big companies from disruption by small ones.

Lots of "shareholders" are people's retirement funds, pensions, and the like. When those funds finally pay out, they get taxed as income just like for everybody else.

Saying that Uncle Scrooge and his buddies own all the stocks is not much worse than implying that normal people own a significant share of the market through their retirement accounts.

Each of the 90 people invest $5k and have 1000 stoks.

Each of the 9 people invest $20k and have 4000 stoks.

The millionaire invests $100k and has 20,000 stoks.

The top 10% have 99.96% of the stoks.

It would be weird if the richest people didn't own most of the stocks. It doesn't necessarily mean there's a problem.

The underlying issue seems to be whether it is ethical for a business owner to make money.

Payroll, benefits, offices, etc are easily >50% of revenue in virtually all ventures (including diamond trade and definitely your favourite tech unicorn)

Also implicit in this statement I think, is the assumption that shareholders don't provide as much value to the business, or perhaps the economy writ large. Arguably the investors at least initially play a more crucial role than any employee no mater how back-breaking their work because without starting capital most businesses don't even get started in the first place. But in general all aspects of the business contribute to success, Shareholders, employees, and executive. I don't think moralizing one class over another is useful to this sort of conversation.

By that same logic, taxing personal income is akin to taking money away from the goods/services/investments that that person would've spent that foregone income.

There's nothing special about businesses that warrants them special privileges.

Money goes into the business, gets taxed, and then goes to employees and taxed again or to shareholders as profits and taxed again.

Why tax twice?

Correct me if I'm wrong, but I think payroll expenses are not a part of profit, so no double taxation here.

The point is that any money that exits a corporation gets taxed again somewhere.

So if a company does really well one year and makes a profit, it gets taxed on that profit even if it keeps it in the bank. Then they use that remaining profit to pay payroll next year and then employees or owners get taxed again.

But your point on double-taxation is certainly valid in some contexts.

Franking credits minimise the double taxation issue in these instances.

Double taxation is the concept where a dollar could, in theory, be taxed at over 100% from the aggregation of taxes owed on it. There are to my knowledge only two real examples of double taxation in America. The first happens due to the new cap on SALT deductions. The second is with regards to FICA taxes.

Oversimplified:

Profit = $Revenue - $Expenses

Tax = $profit % $Tax_rate

From my observation, most people on the internet doesn't seems to care. There was an argument about Apple paying little tax in US. I said Apple is the largest tax payer in US and paid 20%+, then the topic changed to he is paying ~40%, why is Apple paying 20% only?

There is Apple tax in France, there are even some saying Apple should pay tax in France, then paid Tax in Ireland, and pay Tax in US.

There are some saying how can Apple not paying any VAT in France and UK? ( Have they been watching too much Fox News ? )

I mean seriously, unless your whole life have been working on any non business side of things, if any of the job involves calculating profits and sales would know none of these makes any sense. And yet we are in a world with people demanding company should pay more. Which is fair point, but what they are suggesting is ridiculous.

I know many are concern about the lack of money for government spending, but as a counter point, do they realise how much money and inefficiency government have wasted in their bureaucracy, and their out of touch project which more than often leads to failure with sums that is unrealistic by any standards?

And even for individuals, losses over that $3k can be carried forward indefinitely to future years.

It's also possible to pay no taxes if you derive all of your income from investments every year as long as you don't exceed the allowed limit since we have a marginal capital gains structure that combos with our marginal income tax structure.

Or TLDR: don't take away rights like this from corporations, give those same rights to individuals.

I completely agree that you shouldn't need to know the whole tax code to say, "deducting arbitrary figures for payments to a foreign subsidiary shouldn't be allowed and is shady". But "profits didn't cancel out recent losses, thus no taxable income" is not shady.

All I'm saying is, you can't even have the discussion until you know what case you're talking about. Is that really controversial? Did it really sound like I was saying this is too complicated to understand? Is there a better way I could have said it?

> Why cant we have a sceptical approach when the topic in question is large corps?

Sure we can, in fact we must. But skeptical approach means get the facts, verify them, then make decision. Not read the outline, feel outraged, reject any reasonable explanation because we must be skeptical about large corps. Having losses carried over from previous years is nothing wrong, and one part of being skeptical is being able to recognize there's no "there" there, and move on.

The problem is that this is false. I mean, it is true on very short term - but then you can as well be outraged about Netflix not paying taxes this Monday, and ignore the fact that they paid tax on Thursday. If you read the article and try to figure out what it actually says, you'll find out that they do pay taxes (albeit, claimed that at lower rate - 13.6% - no idea why, or how it was calculated, based on what, so one can't verify it) even if they didn't pay income taxes (they probably still pay a lot of other taxes) in one particular period of time. If the average joe can't grok this, it's ok, but then it's probably premature for the average joe to have an opinion on the tax policy. Not that this ever stopped anybody...

> That indicates the system is fucked.

No it does not. It indicates that a clickbait article successfully triggered you into an outrage fit without informing you or enhancing your knowledge.

> There isn't a technicality in the universe that will indicate that somehow our perception is wrong.

If you actually read the article, you'll easily find out why your perception is wrong. It plainly says that Netflix does pay taxes, if you bother to look beyond one single year. Given how many corporations are in the US, and how uneven business cycle and investment/profit undulations are, there always would be cases where some corporation lost a ton last year, and then made some profit this year, but this profit is offset with last year's loss, so they pay little or no taxes in single year. You can always find such examples and blow an outrage out of it. But if you bother to understand it, then you'd see there's nothing to be outraged about - if the profits over longer term are higher than losses over the same term, it will be taxed. Maybe not this year but next - who cares.

I find that objectionable.

Profits should follow arbitrary calendar years?

But if:

* their sole proprietorship loses money in one year, it can be carried forward to offset taxes the next year

* they have net losses in investments, those can be carried-over to offset gains in other years

* any LLCs in which they are members have allocated losses, those can be carried-over against profits in later years

These are the ways a private individual engages in economic activity that are analogous to what a C-Corp does, and for these, the standard is essentially the same.

There are a handful of available carryovers and the concept of NOL is very similar to a private citizen as this discussed concern is to a business.

Innovation and front heavy spending is very much improved do to this issue. It is a sound concept.