what if individual incomes taxes worked like corporate taxes?
corporations don't pay taxes on revenue, they pay taxes only on profit. if a company earns $1,000,000 but pays out $900,000, it only pays taxes on the $100,000. that $900,000 could include things like rent, food, transporations, and labor in addition to raw materials and equipment and advertising and such.
individual income taxes don't work that way, for the most part. if an individual earns $35,000, you pay taxes, you get some exemptions and deductions and pay taxes on the rest. in other words, you pay taxes on REVENUE, not profit. there are exceptions, but generally speaking, you can't deduct your rent, your food, your transportation, your living expenses. if you spend every penny of that $35,000 during the year, you'll likely still own money on taxes.
what if individual incomes taxes were made more like corporate taxes?
if that were the case, people treading water would owe no taxes at all, people lucky enough to manage to save 10% of their income would owe just a little, and the people who would owe a lot would be the rich and particularly the very rich, whose spending is small compared to their outsized incomes.
i haven't thought this one through, but my initial though is that this might be a way to get a more progressive income tax system yet far more politically palatable than directly making the tax rates more progressive. in fact, you could even combine it with a "flat tax". one rate, but it's on profits rather than revenues.
thoughts?
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