wjb@burl.UUCP (Bill Buie) (04/16/84)
-- I've been reading articles endorsing a simple, flat rate tax that does away with all artful deductions, and I've generally agreed with the basic idea. But a question happened to dawn on me: Do you really mean to do away with *ALL* deductions? Consider, for instance, Joe Blow, who is self-employed. Maybe he builds widgets in his backyard or hacks software in his garage. Now Joe's total volume in sales for a given year are $150,000. His expenses, stuff like debt servicing and cash outlays for equipment and raw materials ran to $127,000. Under the present setup, Joe writes off the $127,000 as a business expense, and pays taxes only on the $23,000 he cleared. I think that this is quite reasonable. Is anybody out there talking about taxing Joe for his total volume (resulting in a tax larger than his true income)? You can probably see implications. Would somebody take this up and debate it? I'm learning a lot in this discussion. -- --Bill Buie
bwm@ccieng2.UUCP ( Brad Miller) (04/17/84)
Flat taxes are RE: personal incomes. Businesses still follow the general form of income - costs of doing business = profit and the profit would be taxed at a flat rate. -- ...[rlgvax, ritcv]!ccieng5!ccieng2!bwm
wjb@burl.UUCP (Bill Buie) (04/18/84)
-- Not being rich myself, I could be missing the point. What kind of deductions are "the rich" using? I had figured that the overwhelming majority of them were business-related stuff like Joe, miscellanneous charitable deductions, and interest. I am under the impression that it is possible to make earn untaxable money with the business angle. Somebody once explained to me how I could use the tax situation to my advantage to buy a house to lease, "lose money" on it by using legitimate business deductions, while earning real, spendable cash (for those interested, I think the trick was something about depreciation techniques allowed on business purchases even when the property was increasing in market value). I assumed that it was this sort of thing that has everybody bent out of shape. So, what *is* the point? -- --Bill Buie
notes@iuvax.UUCP (04/19/84)
#R:burl:-43400:iuvax:2000031:000:1045
iuvax!unix68 Apr 18 19:18:00 1984
Concerning real estate as a way to make money by losing money,
you are correct. I worked for a real estate company in town and found
it rather disgusting that people would just by a house, depreciate it
for five years (accelerated depreciation -- God's gift to the rich),
and then sell it at a decent profit. Of course, you have to rent it
out or lease it (to make it a business expense), but usually they've
managed to pull in some fair money from that too.
I suspect most of the real estate law that makes all this
possible was written to prop-up a sagging housing industry. However,
as far as I could tell from my small locality people didn't build all
that much, just buy-sell existing property. There are a few people
a lot richer and a bunch of people here being gouged for rent. I
would hate to guess what sort of money a slum-lord could make considering
that the people we delt with were at least providing some service.
--
James Conley
Indiana University
68K Education Board Project
...{isrnix|iuvax}!jecrjb@akgua.UUCP (R.J. Brown [Bob]) (04/19/84)
When you depreciate an appreciating asset (like a house)
the taxman recovers that depreciation because it is added
to the total capital gain (Selling Price - Original Purchase Price).
For most investors the whole wad is taxed as a long term (held more
than 1 yr) capital gain. This means 40% of the gain is taxed as
ordinary income. As you can see this is a tax deferral with a nice
sweetener since your depreciation expense is deductible year by year
off your income while you only "give back" 40% of that depreciation
as taxable income some time down the road.
Bob Brown {...clyde!akgua!rjb}
AT&T Technologies, Inc.............. Norcross, Ga
(404) 447-3784 ... Cornet 583-3784tac@teldata.UUCP () (04/20/84)
, (sop to the blank line eaters--consider it a religious sacrifice) >> From: wjb@burl.UUCP (Bill Buie) >> Subject: Flat Tax >> >> Do you really mean to do away with *ALL* deductions? >> Well, Bill, I can't speak for the rest of them, but I do. >> Consider, for instance, Joe Blow, who is self-employed. Maybe he >> builds widgets in his backyard or hacks software in his garage. Now >> Joe's total volume in sales for a given year are $150,000. His >> expenses, stuff like debt servicing and cash outlays for equipment >> and raw materials ran to $127,000. Under the present setup, Joe >> writes off the $127,000 as a business expense, and pays taxes only >> on the $23,000 he cleared. I think that this is quite reasonable. It seems to me that he still does this. The businesses should be inc. for Joe's protection, and there are quite different tax structures for businesses as I recall. >> Is anybody out there talking about taxing Joe for his total volume >> (resulting in a tax larger than his true income)? >> It seems to me that the figure most talked about for flat taxes is 15%. At this tax rate Joe would only have to pay $19050 in taxes, not more than his profits (though damn near!). >> You can probably see implications. Would somebody take this up and >> debate it? I'm learning a lot in this discussion. >> -- >> --Bill Buie >> Just imagine our well intentioned government getting the same bug in their ears that you have. Well, says the learned representative from Podunk, New Whereever, we better save ole Joe. So they pass a law that widget makers can't be taxed unless they fail to subtract their expenses. Now comes the cute part--everyone else can still be taxed. So they scratch their heads a few times and decide that conglobules are at least twice as valuable to the economy as widgets so they pass a law that those who make conglobules can write off twice their expenses in deductions. Opps, they forgot the everpopular thingamabob, and we all know how important that is. Soon, Joe is only paying taxes on his profits, Fred is not paying anything, Bob is getting money back (he only made $1.6 Million in the thingamabob business this year) and you and I (who do not get to deduct our expenses) are footing the entire bill. I think that if you look you will find that most people do not get to deduct the actual expenses of day to day living from their income, so why should the rest? The expenses of a business are different in name, but no different in nature than the expenses of a family. It is very important to realize that if you give to a government the power to do something they will mis-do it (sooner or later) every time. A course in the history of government and it's abuses is in order for anyone who would like to disagree with that statement. From the Soapbox of Tom Condon {...!uw-beaver!teltone!teldata!tac} A Radical A Day Keeps The Government At Bay.