I still don't understand how higher taxes on corporation is going to prevent you to hire people, Draginol.

Salaries are paid by gross profits. Not by post-taxes money. You still have as much money to hire peoples after a tax raise than before. the sole problem is that less money comes to YOU in the end, but the business is still working mostly unnaffected (except for the sales, since consumers might have less money to spend, but that's deeper economics than what you are saying about firing people 'cause your taxes are higher)

If there is less money to re-invest in the business, the business does not grow as much, which means fewer people hired.  The cost of a person is an expense.  The investment is income, and is not.

Ever hear of the expression - You have to have money to make money?  You have to have money to invest before it becomes an expense.  If the money is taxed away - no invest - no expense.

That does not work when it is taxes.  Did you know that even filing Bankruptcy does not eliminate a tax burden?  There is no way to "expense" before taxes.  You make a profit, the first thing that comes out (before food shelter or clothing) is taxes.

Sounds problematic to me, playing with the numbers to avoid paying taxes.

Isn't that illegal?

There are many taxes you pay in business that are there no matter what.  For instance the tax you pay on the workers' pay check.  How bout the taxes you spend on items that are used?  I buy paper for paperwork and low and behold... sales TAX.  How would you get out of paying either one of these?

To clarify, I'm talking about taxes on profits (corporation taxes for a co, although it'd be income tax if it's run/owned by an individual). So the cost of labour will be the nominal cost of their pay check plus the taxes paid by the company for them as well - to the company, the cost is the combined amount of the two.

No, counting them as they've hatched rather than letting them hatch, and then almost a year later counting them . I'm also amused to hear you question a steady and predictable stream of money coming in - it's much more realistic than assuming you get 0 money until the end of month 12 where you suddenly get a ton of money, and it can produce the same result if you adopted the slightly more realistic assumption for a game company of having say 2 games released in the year, 6 months apart, each producing a high amount of sales initially which then die off (but obviously it's far simpler to make it easier to understand).

No, there is no law saying that a company can't break down costs month by month and determine how much profit it has made in particular months. Since a company will need to have a good eye on it's cash flow to make sure it doesn't suddenly go out of business even when possible, and will need accounting systems in place to produce it's annual accounts (if it is required to do so - not all businesses are), it isn't exactly much of a streatch to see that they would be able to tell how on track they are with their revenue and costs. In fact it would be a poor company that ignored it's performance each month and waited until 12 months to see that actually they were loss making from month 2 and really should have done something about it. A bit like closing the stable door after the horse has bolted. In fact it is the law that you do precisely such a thing for your accounts - if you pay for your electricity for 1 year with 3 months left in your accounting period, it'd be wrong to count all 12 months paid as an expense - instead 3 months will be an expense, and 9 months a prepayment (counted as an asset, and hence meaning you only end up having 3 months offset against your taxes).

You still don't seem to be grasping that businesses aren't working in some sort of vacuum and only making decisions once a year based on this. If a company makes a ton of money in month 1, what is it going to do with that? It has lots of spare cash lying around, and you seem to be saying they should ignore it, leave it in a presumably low interest account, and wait until the end of the year for it to be taxed and then and only then decide to use it. More likely is they will decide when they have that money what to do with it - do they invest it in the business, or do they withdraw it from the company? (and to help decide what to do they'd want to work out how much of that money is 'profit', i.e. what liabilities they will still have to pay that they will need some of the cash for).

So, if they invest that money back into the business by hiring more staff, guess what? It's now an expense, and won't be taxed at the end of that year. If instead it's taken as drawings, it will be taxed.

I'm starting to wonder if you're being deliberately obtuse here - you make money before the tax year end, invest (some or all of) it into the company by hiring staff to undertake a project, and hence don't get taxed on that money when it comes to the year end, as opposed to waiting until the year end, being taxed on the money, and then start thinking about what you want to do with the money you've been sitting on for ages - what is it you're disagreeing with or not understanding about the 'invest->teated as expense->less tax paid for the year' step? Also profit is a purely accounting measure, so for you to say that I don't understand the difference between profit+cash flow, and then point to cash flow as being the one determined by accounting standards is pretty hilarious! It also suggests a possible lack of understanding that there is more than one kind of profit as well - the profit reported in a company's profit and loss account (determined by the relevant accounting standards) is not the same as the profit a company is taxed on, for example.

Anyway my last example to illustrate it (since I dont want to spend any more time on a fairly small issue):

2 companies, A and B: Initially are identical; Undertake 12 projects each month, each requiring $10k a month to run (all of which is allowable as an expense for tax purposes), and each expecting to provide a 1-off revenue of $200k after 12 months (and as I mentioned before if you want to be more realistic then reduce the no. of projects and have the revenue peak and then drop off from each one). It starts off with 1 super-project ending, yielding a hefty amount of revenue over the first 12 months, before stopping (basically so it has money to invest and won't have carried forward losses in year 2 to keep things simpler).

Month 1: Undertake 1st project, cost $10k, revenue $xk

Month 2: Undertake 2nd project, costs $20k, revenue $yk,

.

.

.

Month 12: Undertake 12th project, costs now $120k, revenue $zk. Co's taxable profits work out to be 0 for this year (again if you want you could always increase this hypothetical figure if it makes you happier)

Year 2:

Month 1: Undertake 13th project, Costs $120k, revenue $200k

Co has $80k of cash (n/t: That's your cash flow, if you're still not sure). Company can either decide to invest this in hiring staff to undertake additional projects the next month, or it can hand it out to the owners (or it could invest in some other way that might not be fully allowable as an expense, etc.).

Company A decides to invest this money, and undertakes 8 extra projects next month. Company B decides to hand it over to the owner(s).

Month 2: A: Costs $200k, revenue $200k; B: Costs $120k, revenue $200k

.

.

Month 12: A: Costs $200k, revenue $200k; B: Costs $120k, revenue $200k.

Taxable profit for the year:

A: $80k B: $960k

A would have also made $960, but they chose to reinvest the money they made back into the business, meaning they could count it as an expense, meaning they're only taxed on $80k, as opposed to $960k.

If you don't like the idea of A counting on receiving revenue from future projects, then have them only undertake 1 extra project in month 3, (and then only undertake future projects when they've made $120k from current ones that have ended), so that they're 'counting their projects as they hatch'. This would still result in a lower taxable profit for the year than B, because the investment in any projects made would be an expense and hence tax deductable. Similarly if you want to complicate things (to make them more realistic) by say introducing borrowing, inflation, effective rates of return for the level of risk, limited number of projects which also feature diminishing returns to scale etc. you can, but there's little point if you don't understand the underlying point.

No, but I beleive you are.  Clearly you dont understand busines 101.  Until you do, you can pipe dream, but real business men will merely smile and nod at the naivete' and out right wrong understanding you have of business.

Any tax code which allows money spent on employees to count as an expense for tax purposes (which would likely be pretty well every capitalist country). Are you really saying that the US (or any other similar country) taxes a company's revenue, rather than it's profit?! (i.e. that costs like staff wages aren't allowable). While there are differences between countries on what they deem taxable profits to be, this isn't (to my knowledge) one of them. In fact I'd be interested if you could point to a tax code from any country that does tax just revenue/doesn't allow the cost of hiring staff as an expense.

So after I again ask you to point to what part you don't agree with or understand, you yet again fail to, and just say I don't undertand business? What a convincing response...

From before:

If you can't understand the basic point of expenses being discountable against taxes, what point is there in me spending far more time making the example more realistic? The example is not meant to be realistic, it is meant to remove any other complications to see the one thing on it's own and the effect it has easily (without removing a complication that would in all, or almost all, cases reverse the result obtained through simplification). If you want the 'your example is too simplistic' point to carry much weight, then show what I've excluded from it that would affect the result (not the amount of the result, but the actual result itself), and which applies in so many cases that the exceptions where it doesn't apply are therefore of little significance.

As to the risk of firing people and incurring expenses relating to that, again see before:

In other words if you aren't very confident about your estimates, and hence want to wait until you have the money (or most of it), it doesn't affect the result (that you reduce your taxable profits and hence tax payable via the investment), it just affects the amount you reduce it by.

You likely didn't read my post fully seeing as I already answered your 'rebuttal' points in it anyway, and then you say I should read and understand? Priceless!

As to uncle sam getting his money anyway, yes, he probabily will - in the above example (if everything goes to plan) you'd expect the investments (that reduced your tax burden for the year undertaken) to yield a profit that would then be taxed in the future. It's simply a matter of timing - better to make an (allowable wholly or partially as an expense for tax purposes) investment in this tax year than waiting until the next tax year because you get the tax relief far sooner.

I'm guessing you didn't realise (one of the reasons) why I made sure the company in the example wouldn't have losses to avoid complication. Either that or you didn't bother reading it, but just jumped straight to responding to it.

If you're going to try and do a rebuttal, make sure you've read the post you're disagreeing with fully first - your above 'rebuttal' points suggest you didn't, since I'd already answered all of them in the previous post.

What I and others are saying busniess can only lessen its tax burden, not get rid of it entirely.

  The taxes an employee pays to the government are matched in taxes on the employer. How do you expense that away?  The answer is you don't this tax gets paid regardless if money is made or not.

  What about taxes on items the business consumes? 

When I buy/sell/use shrink wrap I don't have to pay sales tax on what I buy and sell (though I do have to collect it.)  But when I use the shrink wrap I am supposed to pay the sales tax.  How do you propose I get rid of this tax?