dlawyer@balboa.eng.uci.edu (David Lawyer) (01/11/89)
In article <JEFF.89Jan8105444@stormy.atmos.washington.edu> jeff@stormy.atmos.washington.edu (Jeff L. Bowden) writes: >In article <2542@stiatl.UUCP> john@stiatl.UUCP (John DeArmond) writes: > >>As to subsidies, one could also note that the US government subsidizes >>almost ALL US industry. Don't believe me? Well consider for a >>moment Investment Tax Credits, Capital Gains taxes, interest deduction, >>depriciation, state & local tax deduction, expense deductions including >>labor costs. > >I guess this means that you think businesses should be paying taxes. Perhaps >the solution to competitiveness on the global market is to do away with taxes >on businesses. Business (on the whole) is not subsidized by the government. It actually pays high taxes but most all of this tax is passed along to American consumers as higher prices and this is regressive taxation. The tax laws not only impose a double tax on corporate profit (both the corporations and shareholders pay taxes on profit released as dividends) but the depreciation accounting is quite unfair. For example, if I'm in business and buy a rug for $100 and depreciate it based on original cost, I will have $100 in my depreciation account to buy a new rug when the old one is worn out. But if due to inflation, new ones cost $200 then I will have to take $100 from after tax profit to buy a new rug which means that what the accounting methods considered to be profit (and charged me tax on it) was not really profit at all. Do you remember when Corporations were forced to do replacement cost accounting (and usually included it in fine print or the like in their annual reports and presented it in such a manner so as to make it as incomprehensible as possible)? This showed that many (if not most) corporations were actually losing money rather than making it but this information was intentionally ignored by both stockbrokers and business. Neither wanted to face up to the fact that many corporations were reporting profits but actually suffering losses. Furthermore, business (and individuals) pay taxes on ficticious capital gains since much (or all) of capital gains are due only to inflation and represent no real increase in real value. Business profit is costs minus expenses, and labor costs are definitely expenses. Some of the items mentioned do represent (in part) subsidy such as interest deductions. What needs to be done is to modify accounting practices to account for inflation. There is one major flaw in eliminating taxes on business. Business would retain most profits instead of distributing them to the owners, thereby shielding the owners (including rich owners) from paying taxes. I suggest that business itself pay no tax on its profits but that the persons who own the business be taxed on such profits. Thus stockholders would be assessed taxes on retained profit.