Companies are taxed on profits, so why not individuals?
JoeUser Forums
On this forum I think it's fair to say many people are against progressive taxes, that is, the idea of using the tax system in part to redistribute wealth (either directly by taking a higher % from the rich and giving it to the poor in the form of benefits, or the more indirect method of just taxing the rich at a higher % than the poor). Arguments such as the consideration of the poor's disposable income preventing them from being able to pay as much as taxes are typically dismissed, and it is pointed out that the rich are the wealth generators, and that it is wrong to take from one person to give to another, etc.; why is it that there is such opposition to this for individuals, yet there is never a single complaint about companies getting this very treatment? I mean it's not even like a company has a life to lose.
With a company for example you hire workers, buy some materials, get them to make something, sell that to customers, and make a profit. You then get taxed on only that profit. So most people would be happy with a firm making $100m revenue with costs of $99m to get taxed on only $1m of their profit, just as a firm making $2m with $1m costs would be taxed on the same amount. I'd agree with this - any other method is silly, since if you based it on turnover for example you'd be penalising a firm that bought lots of goods and sold them cheaply, instead of only buying a few of those same goods and selling them expensively. If the company makes a loss they gain loss relief (reduces future taxes paid). Meanwhile if the company decides to splash out and build itself a big image and treat everyone nicely at the expense of it's profits, it will be able to claim all that as expenses, and so not pay any taxes.
However for a typical individual you make your money by working. Meanwhile you have to pay for your upkeep (food, shelter, other basic necessities). Why shouldn't you be taxed just on the 'profit' that you've made? That is, setting an amount roughly equal to the amount of money a person would need to survive with the basic necessities, and only tax any amount earnt above that, and giving benefits (i.e. your loss relief) to those earning less than that. You wouldn't be able to claim any supurflous amounts as expenses unlike a company, you'd just be taxed according to your ability to pay. So if you needed $10k pa to survive, and had one person earning $20k and another earning $110k, the first would be taxed on $10k, the second on $100k.
If you're having trouble mustering any sympathy for the poorer individual, and still think they should be taxed on $20k, not $10k, then think of them as a piece of machinery that is owned by a company. The company needs to spend $10k to maintain that machinery, and can use it to produce various goods with a value of $40k a year. The company rents out it's machine to other companies in return for $20k pa, and makes a profit of $10k. Another company have various machines that they rent out as well, again costing $10k to maintain, producing goods worth ~40k, and generating $20k revenue for the owning company. Why should the first company be treated worse than the second one?
Of course this approach only ends up supporting weak redistribution - in effect resulting in a flat rate tax (if companies are taxed at a flat rate tax; often they're not though) with an annual exemption rate and a benefit system that gives some help to those in need, but not enough (i.e. someone with no income might get say $3k to live on from benefits even if they needed $10k). However such an approach would be at odds with the view that seems to be felt by many that any redistribution is wrong/communist/socialist/evil/[insert other negative word here].
PolMach Forums
