Cpt._Funkotron wrote:I'm not a tax lawyer, and there may very well be a simple explanation for this, but I've always wondered why, if large companies can simply creatively account their profit margins to nearly nil to avoid corporate tax in the first place, we don't just also have a very small tax on gross income, say %3 or something, rather than a large tax on net income, which can be very easily weaseled out of. With the exception of a few tax credits, an ordinary person doesn't get to only pay taxes on what they have after their operating expenses, why should a business?
Ordinary people do get to only pay taxes on what they have after their basic operating expenses, at least in the US.
Living expenses, medical expenses, and work expenses can be deducted from one's taxes, which is why an estimated 45% of households
pay no federal income tax.
Of course, people still have to pay other taxes, such as Social Security payroll taxes, sales taxes, or property taxes if you own property. The same is true of corporations, which also pay sales taxes, the other half of employees' payroll taxes, and property taxes for corporate property.
The primary difference is based on the fact that you're only allowed to deduct "necessary" expenses. Corporations can typically afford better tax lawyers than most individuals can, and their higher tax bills make it easier to justify that expense, whereas many individuals would pay more for the lawyer than they'd save through the lawyer's efforts. Since better lawyers can more effectively convince the IRS that questionable expense X is necessary to the filer's existence, this gives corporations an edge in wheedling deductions for "necessary expenses" out of the IRS.
"If it were all so simple! If only there were evil people somewhere insidiously committing evil deeds, and it were necessary only to separate them from the rest of us and destroy them; but the line dividing good and evil cuts through the heart of every human being. And who is willing to destroy a piece of his own heart?"
- Aleksandr Solzhenitsyn