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mapleoak
Guest
Seems a loan shark would have to charge some pretty hefty interest to even come close.
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Texas_Roofer
Guest
The key word is “firm” so the answer is no, if a individual received the money the answer is yes! Which is a great disservice our government provides ( at least in my opinion)
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vern_humphrey
Guest
Years ago, the word “fair” was copyrighted by people of a certain political bent. Everything they proposed was “fair” and any opposition to it was “unfair.”
So one day I asked, “What is fair?” I asked for a standard by which we could judge ideas and events and come up with a common consensus of “fairness.”
To assist others in answering the question, I gave a fairly simple problem – a mom-and-pop store that had a certain gross income, certain costs and so on.
And everyone who tried to answer simply told me what the tax code said!! Either there is no consensus on standards for fairness, or the standard varies with the current law.
So one day I asked, “What is fair?” I asked for a standard by which we could judge ideas and events and come up with a common consensus of “fairness.”
To assist others in answering the question, I gave a fairly simple problem – a mom-and-pop store that had a certain gross income, certain costs and so on.
And everyone who tried to answer simply told me what the tax code said!! Either there is no consensus on standards for fairness, or the standard varies with the current law.
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Texas_Roofer
Guest
It is an expense which is charged against revenue to reduce income. And the payment is independent of depreciation. Depreciation is your “cash non-cost” which means it is not a real bill it is a theoretically cost which maybe real or non-real and is double dipped for taxes. If you read my last post this is another example of a government providing a disservice to the American worker(IMO). For a common sense version read Robert Kiyosaki’s Rich Dad Poor DadLike I said, “income” is a defined term.
Some years ago, I got into a discussion of amortization and depreciation and all that … cash flow, revenues, expenses, and etc.
So I asked,“OK, so, what is the definition of the payments a company makes to pay off a loan that they used to buy, for example, a piece of equipment?”
And they said, “Wellll, that would be a ‘cash non-cost’.”
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estesbob
Guest
What if my firm is a sole proprietor?
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Texas_Roofer
Guest
I thought you were an accountant? I am not sure one = firm however a sole proprietor ( based on my experience) is at both ends of the under over taxed issue. Often expensing many illegitimate expenses, while is neighbor fails to expense many legitimate business expenses. For a good example look at whether his wife’s car is being depreciated and its care is being expensed
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goofyjim
Guest
It depends on what the cost of supplying those goods and services was. You are taxed on the excess(revenues less expenses.) Or in this case the firm should be taxed.
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goofyjim
Guest
If the “firm” receives excess income then the “firm” is taxed. Otherwise I would sell myself to any employer and just call myself self employed to escape paying taxes.
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goofyjim
Guest
If we are going to start bickering about what is income and what isn’t so as to get the wealthy off without paying taxes then again the only fair thing to do is to scrap the income tax altogether and make the government come up with some other form of revenue. I agree wholeheartedly that these questions about the income tax code just continue to create class struggles.
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SoCalRC
Guest
The fundemental problem I have with this is that it makes neither fiscal or theological sense.
There is nothing to suggest that wealth, effort, and contribution to society are remotely connected. In fact, all the evidence we have suggests that, as a group, the wealthiest 2% of Americans (of whom I admit being one) work less, not more, and are dramatically less subject to perfomance based evaluation.
Look at Circuit City, the highest paid foks at the company decided to improve the bottom line by getting rid of the most experienced store staff and replacing them with lower priced new hires. But, the only thing that differentiated Circuit City from other outlets was that customers go there, pay a little more, but get knowledgable help.
Once the company was largely purged of helpful, informed, staff. Sales plummetted and the stock followed suit. Since that made the stock options held by upper management worthless, they awarded themselves “retention bonuses” instead, averaging about $1M a pop (for those keeping score, that one year bonus is the pay difference between a new hire and the experienced staffer over a 100 years). I could come up with countless examples, and that does not even begin to touch folks who inherit weath.
Does anyone really think that Paris Hilton works harder or contributes more to society than, say, a school teacher in the inner city?
This is just another example of “deserving poor” type thinking. A rationalization that selfishness and greed are Christian behavior. All the tangible evidence is right in front of us. We have the most power, we reap the most benefits from society as a whole, but despite having the most free time and the most material weath, we give less, as a percentage, to charity and volunteer fewer hours than the poorest 35% of Amercians.
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goofyjim
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Couldn’t have said it better myself.:clapping:
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estesbob
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A sole-proprietor can have employees working for him just as any other “firm” can. The point is that when people talk about a flat tax on “income”" they never stop to think what “income” is. In my “firm” I get to take deductions against my “inomce”. to arrive at my taxable "“income” Now if I get to take dedcutions against my “income” why shouldnt the guy who has w2 income be allowed to do the same thing?
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goofyjim
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Bingo. No matter how low his w2 income is and this might result in no taxes being paid. I’m glad we agree.
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Texas_Roofer
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Yes why shouldn’t he? Often the government makes it illegal. A few years back there were people teaching how to file yourself as a business. Under that system you filed for deprecation of your building(house), your car, etc. The government quickly stepped in and made that illegal. Why? if a business can deprecate its automobile why is it not the same for an individual? Same for the house, the travel, lunch, etc. The government uses these laws to social engineer, and the problem is the assumption is the government 1) knows what is best, and 2) can operate such a system responsibly. I suggest neither assumption proves correct.
If you tax everybody the same you may have a fairer tax. BTW did you know the individual tax is flat? It usually ranges from 39.5-40.5%( of income which is roughly revenue ). Not so for business which are under a totally different system, business often pay 2-5% of revenue for income taxes, and probably less than 10% for total taxes.
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SoCalRC
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It does seem clear that businesses, particularly corporations, which are awarded some very specific legal rights, are taxed at a dramatically lower rate then individuals. Rather this is good or bad is a question worth debating. However, what I find disturbing is that they are often given tax incentives to do things seemingly against the common good, like tax breaks for outsourcing jobs overseas, or incentives to shelter income abroad.
What really suprises people is that the near flat line you describe generally slopes the opposite direction from what people expect. When you look at all taxes, not just income tax, but sales taxes, payroll taxes, and taxes on basic commodities like energy and water, lower income Americans pay a higher percentage of their total income in taxes. Across a pretty big swath, say 200% of the poverty line to $250,000 per year, it is relatively flat, with the lower income earners only paying a few percent more. But, at the very ends of the scale it is a different story. At the poorest end, every dime you make is subject to payroll tax, but you don’t pay income tax, so you miss out on deductions. So this group sees taxation as a percentage of income spike. At the top end, in part because we tax investment income at a lower rate than work income, it is another story. Taxation as a percentage of income drops.
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Texas_Roofer
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Did you know a lot of the oversized high pollution SUV’s and pick-ups on the road are used to qualify for tax benefits? If they are replaced with smaller more efficient vehicles some of the tax deductions are disqualified I think it is 4500 pounds minimum to maximize tax qualifications. Do not forget as business vehicles the gas, oil, service charges are all deductable.
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SoCalRC
Guest
The biggest scam is getting the vehicle’s GVRW over 6000 lbs. This makes it a truck, which is a huge federal tax break for a ‘business’ vehicle, you can basically do a straight write off up to $100,000. and you are exempt from the Federal ‘gas guzzler tax’. Some states (like my own, California) also give big tax breaks.
Needless to say, vehicle makers are happy to make luxury heavy enough to qualify. One irony to me is that people want it both ways. They are happy to have it be a truck for Federal tax purposes, but they howl if you try to claim it is subject to truck restrictions.
When my kids were smaller, we had a Suburban. My son is severely disabled, so we drove for family vacations. I did not deduct the vehicle for business, because I only drove it with the family. Further, I paid for a city permit each year I had it. All the residential streets around us are prohibited for 6000 lbs and up. In fact, all the residential streets in Beverly Hills, Pasadena, and Santa Monica pretty much are as well.
With the highest density of luxury SUVs in the country, you think that I’d see a lot of permit stickers. Guess again. You could drive for hours and never see one. I once asked the city council why we enforced the oridinance on landscaping trucks, etc., but not on vehicles that were going out of their way to be taxed like trucks. It was ‘taken under advisement’…
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estesbob
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Its over 6,000 pounds and SUV are excluded now. The additional benefit was being able to write the entire asset off in the year of purchase. That is the only difference between the tax treatment of large trucks/vans and smaller vehicles. This beneifit, BTW, is also available for machinery ad equipment regardless of the weight.
The SUV was a creature of the CAFE standards. Since they were classified as “small trucks” they werent figured into CAFE averages.Thats why you dont see many station wagons anymore.
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Al_Masetti
Guest
You know better than that!!
A business cannot expense a capital expenditure.
A business can only charge as an expense the annual increment of depreciation on the item of capital expenditure. So if the IRS requires that 15-year depreciation be used, and the company has to pay the money on delivery, then the company has a “non-cash cost” for the balance.
There is no double dipping for taxes.
In fact, every company must keep a set of management accounting books and it must also keep a set of tax accounting books. And depending on the size of the company, the IRS may audit the company EVERY year and they use both the management and tax books.
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estesbob
Guest
I made a lot of money representing people before the IRS who fell for this scam. Calling yourslef a business gets one exacly NO tax benenfits. One would be foolish indeed if they wanted to call their house a business expense and depreciate it-they would then forfeit the exclusion of the first $500,000 in gain on a couples home when sold. You can take a portion of your home as an office in home BUT only if you are not provided and office anywhere else . The rules are preety complex.
Most small businesses are taxed as an S Corp which means that theCorporation pays no federal income tax-the net income of the corp flows thorugh to the owners personal return and is taxed at the owners personal income tax rate.
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