Rantman

14

Taxes are a joke for our billionaires and multimillionaires. Progressive taxation will make a dent in income inequality? Haha, nice joke. Not only does the scale and type of their wealth make taxation ineffective, but businesses also receive a fundamental advantage in taxation that is needlessly unfair to the common man. 

Firstly, the major tax slab is on income, meaning new wealth generated. Billionaires and millionaires are not earning billions (unless they are? that is another topic). That is the value of the assets they already own. Apart from property/wealth tax which is mostly meaningless since those assets obviously generate much more than they cost, income tax is only putting a damper on future income. Meaning if you tax Jeff Besoz 99 percent, he'll still be a 100-billion owning billionaire. You only make a dent on his future earnings, which will not even be too major. 

Why? Well, because the rich have methods of reducing tax paid which are unavailable to the common man. Apart from the sharp accountants and army of tax lawyers, the rich can simply transfer their major capital to tax haven countries. In the digital age, its very hard for the government to track how much money is being generated in their country and how much from abroad. Businesses obviously take advantage of this, and adding the numerous legal loopholes available, it leads to a much lower effective tax percent than what was intended. And by the way, this is all legal. Tax avoidance, not tax evasion. Individuals don't have much room for tax avoidance, since our salaries are recorded and its a straightforward deduction from there.

However, the most important factor has still not been mentioned. It is the inherent advantage that businesses receive in taxation. The government literally allows businesses to exist without tax instead of the common man! How, you may ask? This guy is just rambling nonsense, you think. Nope, let me explain.

You see, businesses are taxed on their profit, the money left after subtracting their expenses from their revenues. Businesses are not taxed on revenues, because a loss-making business would face even more difficulty in surviving then. And that's fine. Except, I ask, why isn't the common man taxed in the same way too?

Businesses are allowed a wide range of tax deductible expenses. The business can subtract the rent, raw materials, electricity, water etc. from its taxable income. Why isn't the common man allowed to subtract his rent from his taxable income? Why are we taxed on our full income, not even a concession for our basic necessities? Now, I understand everyone has different expenditure. The thing is, businesses have different expenditures too. A business can't claim spending on frivolous things (such as movies, gambling, entertainment) as tax-deductibles. Same can be with the common man. 

A business is allowed tax-deductions for its operating costs, and for re-investments. Yes, if a business buys furniture/buildings/machines for the business, it is deducted from taxable income. Now, I propose the same should be applied to individuals as well. We should receive tax concessions for rent, for electricity, for food/water, and specially for education, since it is an investment into ourselves. Its a financial rule to first invest in yourself, yet why I'm I not allowed a tax concession for that? We'll earn more in the future (like a business), and be able to pay more to the government, which is the same logic used for business tax concessions. I think some loans are tax-deductible for individuals, but still, there's much, much more that can be included.

A roadblock to this is that businesses record transactions and make accounts, but people don't. However, there are two solutions to this. First solution is that we only allow tax concessions to those who make accounts. (Sidenote: add accounting and finance literacy to schools) People who want concessions are given an incentive to record transactions thoroughly like a business does, and if they don't, well then you can pay in full. 

Second solution is that government calculates the average cost of living, ideally region by region. This isn't that hard, as the government already calculates the CPI and has the prices of generic household goods and necessities, and can roughly estimate the cost of living and food consumption. Electricity and water bill concession for the year can be averaged from the whole of the recorded data that the government already has. Many existing sites already calculate the average cost of living in major regions, and the government just needs to barely sharpen/verify the data to implement it. Add all the costs, create the tax-free slab. Easy. A sidenote- it could be possible that families be taxed together, as rent is a shared cost among them. 

Some countries already have a tax free bracket for low incomes, but it isn't based on calculations of average living cost, and doesn't differ region wise. Work needs to be done everywhere.

In the current state of things, governments literally sanction the existence of businesses over people. Businesses provide jobs? Well, people work at those jobs! And earn money for the government, through tax! While this tax-free slab would be a massive hit to government revenue, it also frees up money for the people struggling the most. Instead of raising minimum wage, which cuts business' margins and causes inflation, we directly free some money for the common man to live without paying tax, and even if some of they waste it, well its fine, its more happiness and a better standard of living! Which is what we all want to achieve in the first place! Which also benefits businesses, since people have more money to spend too!

By the way, just to clarify to some of my readers, tax deductions doesn't mean you don't pay for the service. You still pay your electricity and water bill, your rent, your loans etc. Tax deductions simply reduce your taxable income, and hence the amount of tax the government collects from you at the year end.

Since business pay lesser amount of tax due to both the fundamental advantage in the way they are taxed and the greater ease they have in legal tax avoidance, people have been calling for the ultra rich to share their wealth. This is not any form of stealing or snatching rightful possessions they earned, but simply a callout to the social responsibility they have been avoiding that the rest of us are obligated to follow (by paying tax). Either businesses can pay greater tax instead of using loopholes and inflating their expenses, or use the funds they have for CSR and public service that they owe. And the extra tax they owe is much more than the 2% standard CSR spending, I assure you. And seeing that they do neither to the needful degree, there's the great outcry. If businesses create jobs, people work at those jobs. The contribution of a business and a person to society are more or less equivalent, since both are interdependent. No business is more worthy of keeping alive than the people it serves.

Feel free to vote for me if I ever run for office. Signing out for now.