Taxing the rich more is a popular idea with the rich too

[Shady]

Get that? Taxpayers borrow money to pay for tax breaks for the rich.

Complete nonsense.

What's wrong with this picture!

What's wrong with your picture is that it's completely untrue. Just more lies and propaganda.

[dre]

Complete nonsense.

What's wrong with your picture is that it's completely untrue. Just more lies and propaganda.

Its not nonsense at all its an objective fact. Deficit financing is HIGHLY REGRESSIVE and thats exactly why the gap between the rich and poor actually SHRANK between WW2, and the 1970's. Wealth consolidation started exactly when we started running up massive debt.

[Bonam]

Everyone that's successful in this country is successful because our nation is run in such a way that it makes it safe, secure, and stable with a workforce that's healthy and educated. The public administration that's necessary for this costs money. Those with a greater ability to pay for the kind of society that has made them successful should pay more. That's why we have a progressive tax system in the first place. The idea is that taxes should place an equal burden on everyone. A 30% income tax rate on someone making $20,000/year is a much greater burden to them than a 30% income tax rate on someone making $200,000/year. So those with greater resources pay a higher fee. Indeed, it is the way we run our society that has allowed them to be successful, so they should be expected to foster that success by paying into the system

I think few disagree with the nature of a progressive tax system. I'm pretty far on the "right" as it's classified on these forums but I too support a progressive tax structure. The question is how far to take it. What should the top tax bracket be, and what % rate should apply to it? It is a quantitative question, not a qualitative one.

Now, clearly, people in Canada making $20,000 per year don't pay a 30% rate, nowhere close to it. In fact when I was making ~$16,000/year (working 4 month internships / year as a student) my net tax rate was negative (I'd get refunded all my withheld income tax and then receive a GST/HST credit based on my low income).

And that's fine, if you're making 16-20k, you need most/all of that money just for the basics. Maybe they should pay 1-5% in tax, just so they have some "skin in the game", to satisfy the common conservative complaint that much of the population pays no tax at all.

But lets say person A is making 200k and person B is making 500k. Both are well to do and can afford a wide range of luxuries. How much higher of a % should person B pay than person A, and why?

But to me that is actually kind of a side issue...

The real issue I think is with the ability to reduce your effective income with various deductions, and how it lets people effectively evade tax. I think about 30% top bracket above 150ish k is fine. But people shouldn't be able to evade the majority of that tax. If the top tax bracket is 30% and you're making 1m, you should be paying ~300k in tax (just a little under since some of the income still falls in the lower tax brackets).

Unfortunately, the tax structure is made unnecessarily complex with various exceptions, exemptions, deductions, etc. The main reason for this is that it gives politicians more power. If the tax code has thousands of little loopholes and exceptions, a politician then has the power to add to that a bit, write it one more footnote, and they use this power to gain support and funding. And of course this unnecessarily complex system provides tons of employment for lawyers and accountants, and so they fight to keep it that way and make it endlessly more complex over time.

In my opinion, our tax system needs a reboot. Take the current federal tax brackets and make them the whole entirety of the income tax code. No exemptions, no deductions, period. Then when tax revenue like doubles as a result, you can start lowering the rates across the board.

[dre]

I think few disagree with the nature of a progressive tax system. I'm pretty far on the "right" as it's classified on these forums but I too support a progressive tax structure. The question is how far to take it. What should the top tax bracket be, and what % rate should apply to it? It is a quantitative question, not a qualitative one.

Now, clearly, people in Canada making $20,000 per year don't pay a 30% rate, nowhere close to it. In fact when I was making ~$16,000/year (working 4 month internships / year as a student) my net tax rate was negative (I'd get refunded all my withheld income tax and then receive a GST/HST credit based on my low income).

And that's fine, if you're making 16-20k, you need most/all of that money just for the basics. Maybe they should pay 1-5% in tax, just so they have some "skin in the game", to satisfy the common conservative complaint that much of the population pays no tax at all.

But lets say person A is making 200k and person B is making 500k. Both are well to do and can afford a wide range of luxuries. How much higher of a % should person B pay than person A, and why?

But to me that is actually kind of a side issue...

The real issue I think is with the ability to reduce your effective income with various deductions, and how it lets people effectively evade tax. I think about 30% top bracket above 150ish k is fine. But people shouldn't be able to evade the majority of that tax. If the top tax bracket is 30% and you're making 1m, you should be paying ~300k in tax (just a little under since some of the income still falls in the lower tax brackets).

Unfortunately, the tax structure is made unnecessarily complex with various exceptions, exemptions, deductions, etc. The main reason for this is that it gives politicians more power. If the tax code has thousands of little loopholes and exceptions, a politician then has the power to add to that a bit, write it one more footnote, and they use this power to gain support and funding. And of course this unnecessarily complex system provides tons of employment for lawyers and accountants, and so they fight to keep it that way and make it endlessly more complex over time.

In my opinion, our tax system needs a reboot. Take the current federal tax brackets and make them the whole entirety of the income tax code. No exemptions, no deductions, period. Then when tax revenue like doubles as a result, you can start lowering the rates across the board.

I think few disagree with the nature of a progressive tax system. I'm pretty far on the "right" as it's classified on these forums but I too support a progressive tax structure. The question is how far to take it.

And the problem is we are taking it "less far" than ever before.

But I tend to agree. We should make it part of the constitution that the tax code is not allowed to take up more than 2 or 3 pages. But its the same as simplifying anything else the government does... all those little exemptions and loopholes have a constituency, and those people can vote, lobby etc. Do you want to be the government to tell charities, churches, schools, seniors, investors, indians, and children and families that they are going to lose all their special little exeptions?

Youre still right! But just sayin...

[Bonam]

Do you want to be the government to tell charities, churches, schools, seniors, investors, indians, and children and families that they are going to lose all their special little exeptions?

Sure, I could sit out the next few elections in opposition, if the change could actually be implemented permanently. It'd be worth it. There are plenty of times when a government can implement such a change. Such as when it's probably gonna lose the next election anyway based on polls. Or when the next election is 3+ years away.

But yeah, you are right, things like this aren't gonna happen. Not the way our system works. Things can only ever get more complex, never simpler. When the very last productive person loses his job to make room for one more money counter is when the we'll see a change in this regard. Til then the financial/legal sector will keep bloating and taking up an ever disproportionately larger share of the economy.

[msj]

In my opinion, our tax system needs a reboot. Take the current federal tax brackets and make them the whole entirety of the income tax code. No exemptions, no deductions, period. Then when tax revenue like doubles as a result, you can start lowering the rates across the board.

While I agree that the ITA needs to be simplified I am always amazed at the ideas people come up with to simplify it.

No deductions?

Really?

So you are going to tax me on my gross revenue rather than my net income?

Then let's deal with timing issues - are you going to let me book a bad debt or a doubtful account? The difference not only simplifies bookkeeping but has a big impact on when GST/HST collected can be refunded.

Once again, you're going to simplify it on some stupid ideological basis rather than consider whether or not such legislation is a good idea?

How about meals? Why not only allow 50% of them to be written off? Sure, the 80% given to transport workers is garbage and should be scrapped, but what's so hard about this rule?

How about not allowing the deduction of golf green fees/memberships? Once again, why is that rule so hard to understand?

What about making it so that when people "gift" a capital asset to a close relative that they have to account for it at fair market value (with certain exceptions)?

Once again, what is so hard to understand about that?

How about taxing corporations and integrating the tax system so that paying out dividends to the people who own the corporations don't pay tax twice?

Or how about rules so that if I earn a capital gain in a corporation, the tax free part of the capital gain isn't taxed as a dividend when I pull that part out of the corporation (tax free capital dividend rules).

Yeah, there are a lot of ridiculous tax credits and other unnecessary complexities that should be eliminated.

But to state that we could simplify it as you suggest is not only a matter of ignorance of how tax systems work but for how the real world works.

[TimG]

How about taxing corporations and integrating the tax system so that paying out dividends to the people who own the corporations don't pay tax twice?

I thought the dividend tax credit already did this.

[Bonam]

While I agree that the ITA needs to be simplified I am always amazed at the ideas people come up with to simplify it.

No deductions?

Really?

....

But to state that we could simplify it as you suggest is not only a matter of ignorance of how tax systems work but for how the real world works.

The government needs to collect some amount of tax to run its programs. It can do that by charging a given set of tax rates. If deductions are available, the rates need to be higher to begin with to raise the same amount of money. A complex system with a vast maze of deductions and exceptions is less efficient and only funnels money to tax lawyers and accountants. (Obviously being one of those I'm sure you see great value in this system, nothing wrong with that, everyone values having a job and the conditions that make its existence possible).

But as for me, I will take the more efficient system that has lower base rates. It'll also save me time when filling out my tax return. Even if I can't deduct my golf green membership fee.

As to your questions: there's nothing hard to understand about any one specific rule. The problem is when you get hundreds, then thousands, then tens of thousands of these rules. The rules also interact with each other, in various unforeseen ways.

After we have a clear slate, if we need a few very clear rules that the system doesn't make any sense without, then fine, throw them in. But that's not the case for most of the mess we have now.

But the reality is not even the people in charge of collecting taxes can navigate the complexities anymore. I called with a question and one guy told me one thing, 2nd guy said he didn't know, and 3rd guy told me another thing. Then their supervisor told me to contact a tax lawyer if I wanted more definitive advice. Yeah, gee, thanks.

[jacee]

I know you're intentionally being over-the-top, but this doesn't help any argument. I couldn't be more on your side about this, but I find it as distasteful when someone broad-brushes all of the wealthy this way just as some people broad-brush all of the poor as lazy and not trying hard enough. There are many, many rich people that got there through hard work and good decisions. That doesn't mean that there aren't those that got there out of pure luck however. So don't think I'm completely disregarding what you say. In either case, it doesn't so much matter how they got there.

You correctly detect that I am being somewhat facetious in painting all of "the wealthiest" as what I call the predatory rich - those who get rich and stay rich at the expense of others. Certainly there are those whose hard work, dumb luck or inheritance didn't involve mistreating employees, gouging clients or taking unfair advantage of their power. However, the stories emerging in the wake of the world financial meltdown do show a substantial element of greed pathology, giving 'legs' to the Occupy movement and perhaps forever changing the public perception of wealth.

Is it fair to broadbrush all wealthy people? Of course not ... but it is fair to challenge them to become part of the solution, as some have done (Buffett), to identify the gaps and loopholes and shortcomings that allow predators to benefit disproportionately, and to provide public examples of non-predatory wealth and values.

Everyone that's successful in this country is successful because our nation is run in such a way that it makes it safe, secure, and stable with a workforce that's healthy and educated. The public administration that's necessary for this costs money. Those with a greater ability to pay for the kind of society that has made them successful should pay more. That's why we have a progressive tax system in the first place. The idea is that taxes should place an equal burden on everyone. A 30% income tax rate on someone making $20,000/year is a much greater burden to them than a 30% income tax rate on someone making $200,000/year. So those with greater resources pay a higher fee. Indeed, it is the way we run our society that has allowed them to be successful, so they should be expected to foster that success by paying into the system.

I couldn't agree more. There's far too little recognition by business and industry of the advantages they gain from doing business in Canada. Universal health care alone saves them billions in employee health insurance and costs, while providing a healthier workforce. Infrastructure, government pensions, corporate subsidies, paid maternity/paternity leaves and many many other government programs and services also reduce employer costs, and yet on average, corporations pay about a 20% effective tax rate, like lower income Canadians. These 'virtual' Canadian 'persons' create wealth for executives and shareholders while paying poverty-level taxes, definitely NOT a "fair share".

Some people on this forum say, "well how do you know it's not more of a burden on the 'rich' person?" It's obvious. Look at the numbers. There's a certain baseline of funding one needs for food, clothing, and shelter in this country. Those people that say "how do you know" will argue that once a person pays $200,000/year pays for their mortgage, the lease on their Audi, their trip to Hawaii this year, and their kids college tuition, that tax burden would be disproportionate. That's like saying, "sure I'm rich, but not after I spend all my money." That's not at all the same thing as having someone fall below the point where they have to start deciding whether they buy a winter coat or have heat in their apartment through the winter. It's not the same thing as taxing a person so they fall below the point of having to choose between feeding their kids or having their hot-water tank replaced.

Agreed.

Anyway, I'm getting way off my original point because I already know how some people will respond. All I'm saying is that not all rich people got there by dumb luck or inheritance. Some of them certainly did, just like some poor people are poor through no fault of their own. I just don't like the idea that you paint this picture of all rich people having nothing to do with their wealth because that's as untrue as saying all poor people are poor through their own doing.

Again, I have to point out that wealth may come from luck, inheritance, or working hard and smart, but you fail to even mention at all the sociopathic greed and of predatory wealth that is so prevalent in the financial sector, for example, that caused a worldwide financial meltdown and severe hardship for many people, most of them not wealthy but barely getting by, losing jobs, homes, retirement funds, kids college funds, everything ... decades of hard work wiped out instantly by greedy wealthy sociopaths.

I may be too hard on the wealthy, but you are too easy, cybercoma. The predators among them will just carry on carrying on unless the rest of them blow the whistle ... tell the truth ... and insist on regulation and public oversight to block predatory activities.

"All that is necessary for evil to prevail is for good people to do nothing."

I question whether those who know the evils but do nothing to help can really be considered "good people". Frankly, the culture that demands that people not blow the whistle on others is the culture of criminals, imo.

In the context of this thread topic, it doesn't take a survey to know that the shoe is on the other foot now: The public's respect for wealth is at a very low point and they are demanding changes and demanding that the wealthy justify their wealth and their contributions to the larger society.

[jacee]

While I agree that the ITA needs to be simplified I am always amazed at the ideas people come up with to simplify it.

No deductions?

Really?

So you are going to tax me on my gross revenue rather than my net income?

...

Yeah, there are a lot of ridiculous tax credits and other unnecessary complexities that should be eliminated.

But to state that we could simplify it as you suggest is not only a matter of ignorance of how tax systems work but for how the real world works.

Not my area of expertise, but I agree with posters here who say that the overly complex system of tax loopholes needs to be corrected. Granted there likely should be allowance for some costs-of-doing-business but there should also be incentive to keep costs low, rather than jacking them to the max with NHL VIP seats, 3 martini lunches, yachts, jets, vehicles, ski condos, cottages, vacations, prostitutes, Vegas junkets, Golf/yacht club memberships, etc etc etc. It's not like doctors really need to schmooze for clients, for example.

These are luxuries most of us taxpayers can't afford, and yet we subsidize the lifestyles of the rich.

However, that could be a horrible quagmire to unravel, costly in both public service and political expense without cooperation of the business/corporate community, and they're not likely to volunteer without incentive. I suggest, thus, a system of caps on deductible expenses, consistent within industries, and on the lean side rather than generous, to encourage business to keep their costs down or at least not inflate them outrageously.

[jacee]

Name='jacee', on 16 April 2012 - 05:39 AM, said:

Get that? Taxpayers borrow money to pay for tax breaks for the rich

Complete nonsense.

What's wrong with your picture is that it's completely untrue. Just more lies and propaganda.

Hmmm ... Where's your info to the contrary.

Here's info that supports my position.

Corporate Income Taxes, Profit, and Employment Performance of Canada’s Largest Companies Canada’s Largest Companies

The government estimated that by 2011-2012 the [corporate income tax] cuts from 2006 would be costing [TAXPAYERS!] more than $10b a year ...

However, while corporations made 52% more profits in 2009 than in 2000, they are paying almost 20% less in federal/provincial income tax.

The rationale for tax cuts included

- corporations would make more profits so still pay the same $amount in taxes ... but no, increased profits do not make up the difference

- corporations would create more jobs ... but no, corps. Benefiting most from tax cuts have increased jobs less than the national average.

The annual deficit is $30-40b.

The $10b+ in useless tax cuts would balance the budget in 3 years or less without penalizing the poorest people -children- on welfare or making other cuts.

Another $10b annually could come from increasing taxes on the wealthiest.

[cybercoma]

I don't know if anyone has let you know, but Shady doesn't have to back up what he says. He just says it and its gospel. That's why some have taken to calling him 'The Professor'.

[bleeding heart]

Complete nonsense.

[cybercoma]

:lol:

[jacee]

I don't know if anyone has let you know, but Shady doesn't have to back up what he says. He just says it and its gospel. That's why some have taken to calling him 'The Professor'.

I don't know any Professors who can get away with that.

I just assume that Shady has more opinions than knowledge.

[msj]

I thought the dividend tax credit already did this.

Of course it does.

If you look at what I'm replying to you will see the usual "let's simplify taxes" mantra without any thought behind it.

The dividend tax credit (among many rules for dividends) is a complication of the tax system.

A very necessary complication that the LST mantra chanters are clueless about.

[msj]

Not my area of expertise, but I agree with posters here who say that the overly complex system of tax loopholes needs to be corrected. Granted there likely should be allowance for some costs-of-doing-business but there should also be incentive to keep costs low, rather than jacking them to the max with NHL VIP seats, 3 martini lunches, yachts, jets, vehicles, ski condos, cottages, vacations, prostitutes, Vegas junkets, Golf/yacht club memberships, etc etc etc. It's not like doctors really need to schmooze for clients, for example.

1) When I expense something I am still out. So if I expense something at $1 I might save 13.5 cents (I'm a small corporation) so I'm still out of pocket 86.5 cents.

Last time I checked, I want to keep my costs low because I'm not so stupid to think it's a good idea to spend $1 to save 13.5 cents.

2) Why do you think the tax act gets "complicated?"

The government has to implement rules to prevent people from writing off expenses that should not be written off and to reduce/eliminate expenses that are personal in nature.

Sure, there is a general provision that expenses must be incurred in order to earn income blah blah blah (section 18).

But that's not enough.

So we have section 67 to reduce/eliminate write offs for meals, golf fees etc...

3) I do not enjoy taking clients our for lunch/dinner because I'm only going to write off 50% of it.

If I'm taking just one client then fine - I'm deducting his and mine is personal.

If I'm taking out 5 people then it sucks as I'm out 50% on all 6 of us.

And, in the end, I'm still out the entire cost of the meal, less the puny tax savings I get (oooh, 6.75 cents on the dollar).

These are luxuries most of us taxpayers can't afford, and yet we subsidize the lifestyles of the rich.

This is laughable.

The fact is YOU DO NOT SEE other people's tax returns. YOU HAVE NO IDEA who is paying what.

You hear this anecdote and that anecdote and think they are the norm without any basis for comparison.

And you wallow in this ignorance proudly.

However, that could be a horrible quagmire to unravel, costly in both public service and political expense without cooperation of the business/corporate community, and they're not likely to volunteer without incentive. I suggest, thus, a system of caps on deductible expenses, consistent within industries, and on the lean side rather than generous, to encourage business to keep their costs down or at least not inflate them outrageously.

There are already caps on certain expenses: thin capitalization rules, rules for transfer pricing, restricted farm losses to name a few.

This makes the system more complicated although often it is a necessary evil to do this otherwise every hobby farmer would be getting a tax subsidy from deducting a farm loss on their tax return each year.

[msj]

The government needs to collect some amount of tax to run its programs. It can do that by charging a given set of tax rates. If deductions are available, the rates need to be higher to begin with to raise the same amount of money. A complex system with a vast maze of deductions and exceptions is less efficient and only funnels money to tax lawyers and accountants. (Obviously being one of those I'm sure you see great value in this system, nothing wrong with that, everyone values having a job and the conditions that make its existence possible).

So how do you determine what is deductible and what isn't?

Are you going to be prescriptive about it? This is ok, that ain't?

Put caps on it?

Do you know that the accounting rule books (as in IFRS, NFP, PSAB, ASPE - 4 different sets) are bigger than the Income Tax Act?

You want the government to simplify the tax system when businesses are complicated they need accounting rules that are bigger than the ITA?

I mean really?

But as for me, I will take the more efficient system that has lower base rates. It'll also save me time when filling out my tax return. Even if I can't deduct my golf green membership fee.

Sure, in Canada you would likely be a guy with a T4 slip and a RRSP contribution slip.

For businesses it's not that simple - there is the problem of allowing them to deduct legitimate business expenses (and putting in place complications like thin capitalization rules to deal with complicated realities), the problem of cracking down on them when they try to deduct personal expenses, and other areas that get complicated like dividends (and I have not even mentioned the problem of inter-corporation dividends....).

Reality is complicated and our tax system will need to reflect that to a certain degree.

Just as the accounting rules do.

As to your questions: there's nothing hard to understand about any one specific rule. The problem is when you get hundreds, then thousands, then tens of thousands of these rules. The rules also interact with each other, in various unforeseen ways.

Sure, but a good rule is a good rule.

After we have a clear slate, if we need a few very clear rules that the system doesn't make any sense without, then fine, throw them in. But that's not the case for most of the mess we have now.

You don't even know the existing system well enough to talk about doing any of this.

Yes, there are many ways we can make the system simpler and more efficient.

The way you have mentioned is not one of them.

But the reality is not even the people in charge of collecting taxes can navigate the complexities anymore. I called with a question and one guy told me one thing, 2nd guy said he didn't know, and 3rd guy told me another thing. Then their supervisor told me to contact a tax lawyer if I wanted more definitive advice. Yeah, gee, thanks.

Yes, it can be very complicated.

So is life.

Edited April 18, 2012 by msj

[Bonam]

...

For businesses it's not that simple - there is the problem of allowing them to deduct legitimate business expenses (and putting in place complications like thin capitalization rules to deal with complicated realities), the problem of cracking down on them when they try to deduct personal expenses, and other areas that get complicated like dividends (and I have not even mentioned the problem of inter-corporation dividends....).

I was speaking about income taxes, that is, taxes on income paid by individuals. Not business taxes.

[Bonam]

Yes, it can be very complicated.

So is life.

That's no reason to invent a giant bureaucracy with a maze of rules just to make life even more complicated.

[msj]

That's no reason to invent a giant bureaucracy with a maze of rules just to make life even more complicated.

Sure, but it does mean that we need a tax system that works with modern realities.

How do you propose we deal with taxing corporations and shareholders?

How do you integrate taxes so that everything works out without giving too much of an advantage to people like me who run businesses through corporations?

You have to consider the time value of money, for example, which is what the idiots who go on about not taxing corporations fail to understand (or understand only too well and are being disingenuous about their motives).

Sure, take out the volunteer firefighters, children's artistic and fitness tax credits, and a whole bunch more.

But a business still needs to conduct business which means they must spend money to earn money.

A corporation has different ways to pay out its retained earnings which require different rules.

Etc, etc.

To fail to understand such considerations in the first place is mind boggling in itself.

[msj]

I was speaking about income taxes, that is, taxes on income paid by individuals. Not business taxes.

Businesses pay income taxes and all of those rules are included in the ITA too.

Corporations and businesses are one of the main reasons the tax system is so complicated.

[Bonam]

Sure, but it does mean that we need a tax system that works with modern realities.

How do you propose we deal with taxing corporations and shareholders?

How do you integrate taxes so that everything works out without giving too much of an advantage to people like me who run businesses through corporations?

You have to consider the time value of money, for example, which is what the idiots who go on about not taxing corporations fail to understand (or understand only too well and are being disingenuous about their motives).

Sure, take out the volunteer firefighters, children's artistic and fitness tax credits, and a whole bunch more.

But a business still needs to conduct business which means they must spend money to earn money.

A corporation has different ways to pay out its retained earnings which require different rules.

As I already mentioned, I was talking about taxes for individuals. These do not require all the complexities that taxing a business do, and yet they can be brutally complex nonetheless.

Nonetheless, for corporations it shouldn't inherently be much more complicated either. The tax should be applied on the profit. The profit should be the same profit they report to their shareholders in their various quarterly and annual reports. And that profit should be calculated based on the sum of all real revenue minus the sum of all real expenditures. Just like when I do my taxes on my stock trades, the net gain I put in is simply the sum total of all sales minus the sum total of the cost basis. No special deductions, devaluations, or % rates for various types of expenditures.

With simple rules, the examples would go something like this:

If a company makes $1 million in profit and pays it all out in dividends, then that dividend is a real expenditure and the net profit is zero. But that dividend gets taxed as income on the recipients of said dividend.

If a company makes $1 million in profit and pays out no dividend, it will report the $1 million profit in its report and pay tax on it.

If a company makes $1 million in profit and decides to pay it out as bonuses to employees, then those are real expenses but will be taxed as income of those employees.

If a company uses the extra money to buy new equipment and makes no profit they should pay no tax. But the company that sold the equipment will then have made more money and will pay tax accordingly.

Summing up net revenue and net expenses should not be too hard. Just keep all your invoices and add em up.

Edited April 18, 2012 by Bonam

[msj]

As I already mentioned, I was talking about taxes for individuals. These do not require all the complexities that taxing a business do, and yet they can be brutally complex nonetheless.

Most people's taxes are not that complicated.

Yes, I agree it is stupid that we pay people who spend their time looking over receipts to ensure that the kid was in a program for 8 weeks or a camp for 5 days etc etc so the parent can save $75.

That stuff is easy to do away with.

It's the low hanging fruit.

If I were to simplify the tax system that's where I would start - schedule 1 of the federal tax return.

Nonetheless, for corporations it shouldn't inherently be much more complicated either. The tax should be applied on the profit. The profit should be the same profit they report to their shareholders in their various quarterly and annual reports. And that profit should be calculated based on the sum of all real revenue minus the sum of all real expenditures. Just like when I do my taxes on my stock trades, the net gain I put in is simply the sum total of all sales minus the sum total of the cost basis. No special deductions, devaluations, or % rates for various types of expenditures.

With simple rules, the examples would go something like this:

If a company makes $1 million in profit and pays it all out in dividends, then that dividend is a real expenditure and the net profit is zero. But that dividend gets taxed as income on the recipients of said dividend.

If a company makes $1 million in profit and pays out no dividend, it will report the $1 million profit in its report and pay tax on it.

If a company makes $1 million in profit and decides to pay it out as bonuses to employees, then those are real expenses but will be taxed as income of those employees.

If a company uses the extra money to buy new equipment and makes no profit they should pay no tax. But the company that sold the equipment will then have made more money and will pay tax accordingly.

Summing up net revenue and net expenses should not be too hard. Just keep all your invoices and add em up.

I don't have time to deal with the many ways that your simplification examples fail.

Good thing it's tax season and I have too much work to do.

[Bonam]

Most people's taxes are not that complicated.

Yes, I agree it is stupid that we pay people who spend their time looking over receipts to ensure that the kid was in a program for 8 weeks or a camp for 5 days etc etc so the parent can save $75.

That stuff is easy to do away with.

It's the low hanging fruit.

If I were to simplify the tax system that's where I would start - schedule 1 of the federal tax return.

Yeah that's pretty much what I was aiming at too. But, I do still think corporate taxes can and should be simplified also.