Friday, July 18, 2014

"They're five cents lower per pound on welding wire"

You know you have to compare prices to get the best deal.

You also know that the big companies can give you lower prices than the little companies. It's buying in bulk, or economies of scale, or some such thing.

But let me ask you this: Do you think it's right that the government should help the big companies more than it helps little ones? Help Walmart drive Mom-n-Pop out of business? Is that right? Certainly not.

And yet we have a business income tax system that lets you write off all your expenses. Gives you a tax break for all your expenses. So if you're Mom-n-Pop, with business expenses of a hundred thousand a year, you avoid paying taxes on $100,000. If you're one of the big guys, with business expenses of several billion dollars a year, you avoid taxes on several billion dollars, because of our tax system.

Our tax system favors bigness. And then we moan about "too big to fail".

BTW: The total amount of business income tax deductions is approximately twice the size of GDP.

1 comment:

Jerry said...

I think it might be even worse than that.

I guess that I still think income is the wrong thing to tax. The things that you are paying for are all stocks, rather than flows. e.g. - the military and the cops don't just protect the stuff you bought or sold this year -- they protect all of your stuff. The highways aren't just used by the trucks you bought this year -- they're used by all of your trucks. etc. So I think the base thing (before deductions, incentives, etc are applied) should be a flat tax on net worth. Net worth is the real "bigness", not income.

So, for instance, if you have a huge but inefficient company (so, say, net worth is $1B and the yearly income is $1M), versus a small but efficient company (net worth $100M, yearly income $1M), actually the disparity between their two tax rates is a lot higher than you would think. (If they're paying 10% on income, then the small company has paid 1% of his net worth, while the large one has paid 0.001% of his net worth).
(I wonder if you could say that taxing income, rather than net worth, incentives inefficiency.)