That's what the standard/itemized deduction is supposed to represent. The problem is that we obviously can't let you deduct everything, because if you can deduct everything there would be nothing to tax, aside from savings. And you really don't want to tax savings because savings (also known as "investment") is what makes the modern economy possible.
> The problem is that we obviously can't let you deduct everything, because if you can deduct everything there would be nothing to tax, aside from savings.
This is the point the parent poster is making. We say that it's ok for corporations to deduct everything, but not the people? Why are we ok with that?
Because companies, to some approximation, are pass-through entities, so it doesn't make sense to tax them. Most of the stuff you buy are for own use/consumption. Food is an obvious one, but so are movie tickets TV and last year's European vacation. Companies don't do any of that. It doesn't need food, movie tickets, or European vacations. It might buy flight tickets for its employees to go on sales trips or whatever, but it's not for the company itself. Moreover if you're buying stuff for business purposes (eg. you're a contractor and need a flight ticket to go meet your client), you can deduct it too.
More practically, taxing revenue or not allowing companies to deduct expenses would heavily encourage vertical integration. A vertically integrated widget factory will only have to pay such a tax once, but a widget factory that buys its sheet metal from a foundry, which gets its ores from a miner will have to pay the tax 3 times. That's bad for the economy because it discourages specialization and division of labor, which is basically the other pillar of the modern economy.
And yet they sure seem to cater a lot of lunches and dinners, pick up the costs for large corporate events, pay for suites at event venues, and fly executives around the world in private jets.
Those are taxed at 50% rate, specifically for this reason
https://www.irs.gov/publications/p15b#en_US_2025_publink1000...
>pick up the costs for large corporate events
define "costs"?
>pay for suites at event venues, and fly executives around the world in private jets.
If it's for legitimate corporate purposes, I don't see the issue, because as a contractor you can do the same deduction. And while I'm sure there's some non-zero amount of improper expensing going on, the amount relative to income taxes paid by the employee makes this a non-issue in practicality. The IRS has better things to worry about than grilling a company on whether some executive's 1 week stay at a $500/night hotel (tax value: $3500) was a proper expense or not, when the executive makes $500k+ TC.
If they wanted you to deduct housing costs they'd just let you deduct housing costs. Instead they play games about mortgage interest deductions because they want to incentivize certain kinds of living arrangements over others and give handouts to some voters but not others.
I agree the idea of only having households pay taxes on savings is pretty much untenable with existing revenue structures and would be disencentivizing things we want to incentivize. Just pointing out how corporate taxes just seem pretty absurd from what households pay in comparison.
Let's imagine two groups of people. One group gets a bonus and takes that money to go on a cruise. Easily 30%+ of that money gets taken by income taxes (including FICA). The other group gets their company to just pay for them to go on that cruise as a team building exercise/corporate summit/planning meeting/whatever you want to call it. That's negative taxes in the end, the cost of the business operating, it's a cost that offsets revenues. Good luck getting that audited and declared taxable.
Totally seems fair.
Your "they" is doing a lot of work here.
In reality, this system isn't top-down; it's bottom-up. Influential groups of voters (corporations, sure, but also just various stripes of "rich people" — and even upper-middle-class people at the municipal level) go out and lobby their local and regional representatives to get exceptions carved out for them (and, mostly coincidentally, people like them.)
The voters who don't get handouts are the ones who have no political influence.
(Fun fact: our current situation with capital-gains taxes, was an attempt to "rationalize" a system that was previously similarly cronyist in shape. It used to be that there were particular exceptions carved out for investment classes A and B and C that rich-and-influential people invested in, and none carved out for your regular Joe. People got mad, and the government's solution — rather than removing the carve-outs — was to just make them equally accessible to everyone.)
How is that negative taxes? At best it's tax free, but calling it negative tax (because it's lower than the alternative?) is double-counting. Moreover AFAIK this sort of tax evasion mostly happens at the small business level (eg. a plumber buying a pickup truck and then using it to go to the grocery store and pick up his kids from soccer practice), but it doesn't really happen at the corporate level because 1) such spending will almost be in contravention of corporate governance policies and be flagged by auditors and 2) you need so many people in on the conspiracy that it's impossible to keep a lid on it. Plenty of companies get flak for their subsidiaries in tax havens, but I'm not aware of any serious allegations of corporate tax evasion by the way of fringe benefits.
The other reason is to tax the rich, but you can do that by simply taxing the rich directly. If we fear powerful companies, we can put some sort of scaling size tax on the largest ones.
Do you realize that won't produce more revenue, it will just bankrupt companies and produce less revenue?
Companies are already incentivized not to waste by competition. That's the whole point of capitalism. You don't need taxes for that.
This is part of the reason why if you look around America today it's going to be 99% big corporate players dominating markets and 1% small businesses barely staying afloat.
That doesn't make any sense. You're saying, instead of consumers getting lower prices, they should pay more and that money should go towards taxes. That means, essentially, that you're asking the consumers to pay taxes.
What you're describing is predatory pricing. People have mixed views on that, but if you want to address it, then address it directly. Taxing revenue is a strange, roundabout way of doing it that is going to harm a ton of non-predatory businesses without actually changing the market dynamics of predatory pricing -- because your taxes will be affecting the non-predatory companies even more! Since they, by definition, charge more money and therefore will be paying more taxes on the greater revenue.
We have some methods to address predatory pricing but I think it's obvious they pretty much don't work on any scale that matters. When I look around the modern US, I see the least amount of successful small businesses I've ever seen in my lifetime. We're living in a corporate hellscape, and more and more business look to rent-seeking anti-consumerist behavior.
It really doesn't at all. It's quite neutral in that regard.
> Companies actively try to optimize for the lowest amount of profit
This is self-evidently false. Companies actively optimize for the greatest total profit, considering the net present value of future profits. This does mean delaying profits if reinvesting them is expected to yield growth. This is desirable.
> We have some methods to address predatory pricing but I think it's obvious they pretty much don't work on any scale that matters.
Honestly it hasn't been a major policy priority. They could absolutely work if implemented, but not everyone agrees it's a problem that needs solving. Many people consider it to be hostile to a free market. I'm not taking sides here.
> When I look around the modern US, I see the least amount of successful small businesses I've ever seen in my lifetime.
The major culprit here is technology and economies of scale. The tax code has some quirks, but it is essentially irrelevant here. Even if predatory pricing accelerates the demise of some small businesses, they weren't going to last much longer anyways. Which is why predatory pricing isn't actually nearly as common as many people think, and why it's not always viewed as a problem. E.g. Uber and Lyft engaged in it for years, but traditional taxis are still in business. Small businesses have been disappearing because they simply don't have economies of scale. Their products cost more so people don't go there. It's that simple. Nothing to do with the tax code.
My vacations, car payments, food expenses, and housing expenses are absolutely not able to be written off. One part of my housing expenses may be able to be written off, but not anywhere near all of them. Some education expenses, but not nearly all. I get $5k of untaxed income for childcare for the year. How many weeks do you think $5k covers for two kids?
https://www.fidelity.com/learning-center/smart-money/hsa-con...
They are taxes on revenue, but with a set of allowed deductions (e.g. labor costs, R&D, capital expenditure, etc. etc.)
Whether you call that a tax on profit or a tax on revenue with business related deductions is really just a matter of perspective.
As is the case for an unprofitable company.
At least, that was the publicly delivered account.
For a billionare who can already retire in comfort few will ever know to be using any kind of IRA for any purpose is outside of the publicly given justification for their existence.
So if you're sufficiently rich (by some arbitrary amount), you're now a "tax evader" and "not paying your fair share"? Can we say the same about other deductions, like the standard deduction? I doubt you'll be able to find a politician that answer "yes" to "do you think bill gates' first $14.6k in income should be tax-free?", does that mean that's "tax evasion" too?
The standard deduction has an entirely different purpose which is not negated by extremely high income and/or wealth.
IRA's, however, were set up for a specific purpose for which Thiel is not the target.
I really don't know how this is difficult unless you're trying to be a troll or somehow miraculously don't comprehend how numbers work.
So the question is really: why do some people only get to save $7k a year in an IRA and others get to save much, much more?
>employees of small and less well funded businesses
For example, a startup without the funds or time to do all the HR to allow for 401ks is disadvantaged because their employees cannot contribute as much to a retirement account as someone who works for a business that offers a 401k (or for themselves).
A person has the following choices:
1) work for a business offering a 401k (usually larger, well funded, etc)
2) work for themselves
3) work for a small, upstart business (usually smaller, not as well funded, etc)
Why does working for #3 disallow you from saving as much for retirement? Why are tax advantaged retirement savings a function of your employer at all?
Same for paying for health insurance with pre-tax income.
So my time spent on this ends now.
https://www.currentfederaltaxdevelopments.com/blog/2018/7/12...
Some examples:
> Food conglomerate Archer Daniels Midland enjoyed $438 million of U.S. pretax income last year and received a federal tax rebate of $164 million.
> The delivery giant FedEx zeroed out its federal income tax on $1.2 billion of U.S. pretax income in 2020 and received a rebate of $230 million.
> The shoe manufacturer Nike didn’t pay a dime of federal income tax on almost $2.9 billion of U.S. pretax income last year, instead enjoying a $109 million tax rebate.
If you think this is the same as someone putting $7k into a 401k then you are acting in bad faith and we have nothing productive to discuss.
Those cases are different, even though the legal status of them may be the same.
What you're describing is tax fraud, and that's different from corporations using legal strategies to mitigate their tax burdens.
"A way of avoiding or escaping a cost or legal burden that would otherwise apply by means of an omission or ambiguity in the wording of a contract or law." - The American Heritage® Dictionary of the English Language, 5th Edition.
What they're describing is corporations using legal strategies to mitigate their tax burdens that you or I cannot do. Lobbying is legal, but you or I cannot lobby to any useful degree. Big-box store companies build their stores to be short-lived buildings, then will only sell them with a contract that says the next occupant cannot be a big-box store, then argue that since value is determined by what someone else will pay and nobody will pay much for the end of life of a short-lived store intended to be a shop but which now cannot be a shop, so their stores are low value and comparable to empty stores, therefore they shouldn't pay much tax on them. "In Wisconsin, new Gov. Tony Evers says his budget proposal will close the dark stores loophole in the state"[1].
> "Legally avoiding taxes isn't cheating."
Try arguing that you would only sell your houses with a stipulation that nobody can live in it, therefore you should pay the same taxes and rates that an empty lot would pay, and see if you still think that "legal is the same as right and fair".
[1] https://slate.com/business/2019/02/dark-store-theory-big-box...
But if I’m playing a multi-player game, there can be rules of that game that ban the use of cheat codes. Breaking those rules would be cheating.
Laws are not enacted in spirit, they are drafted, voted on, and enacted in text. What the law says is what matters, not what people assume it wants to achieve.
To claim that complying with the law exactly as it is written is unfair is, quite frankly, undemocratic and an outright rejection of the rule of law.
In reality, there is no objective definition of "a fair share", there is only the intent expressed in the tax code (and people of course argue over what the intent "really is"). If people and/or corps. are paying taxes following that intent, then for all practical purposes, they are paying their "fair share".
And that's what our tax system is designed around.
Corporations, and specifically their status (or otherwise) as "persons" complicates the picture quite a bit.