It seems to me that if you spend 120K to make 100K in SALES then you are negative 20K there for you have NO income and would owe NO taxes am I missing something here? The tax would be on your income, NOT your sales!!!!!
Go look at a Schedule “C” at irs.gov
There is one place where “gross income” is used, and that is in essence where the cost of goods sold is subtracted from “gross sales”.
That means there is no consideration for rent paid or salaries paid or vehicles used or machinery bought, things the owner probably thought or thinks necessary to conduct his business.
“Income” is a rotten term to use for a business. It is fairly meaningless and noncoherent in its meaning as far as I am concerned. A business owner may be said to have “business income” because of his ownership of the business, but that is more a convenient contraction of terminology.
Suppose I wish to open a business largely identical to yours. You have an old lease on premises where you pay $1000 a month. I cannot find any place to run my business where the rent is less than $2000. a month.
Now that is fine, you had the acumen to obtain your lease earlier than I did. Congratulations.
As things are, if we sold the same amount of stuff with the same number of employees and cars and widget machines, you would be rewarded by $1000 a month in money you didn’t have to spend. As far as I am concerned, you’re entitled to it.
Under the gross income tax proposal though,
I would spend $1000 more in rent, obviously reducing any profit I could pull out of the business. I would also pay the same amount of tax as you since our grosses would be the same. But I would have $1000 less every month from which to pay those taxes. They would be far more punitive.
For the convenience of being able to encapsulate how businesses are taxed in one sentence, dozens and dozens of ripple effects would emanate from this change. I am no more in favor of one-sentence liberal sloganeering any more than I am in favor of one-sentence whatever-this-is sloganeering.
I don’t my business to be able to run inside the brain of Maxine Waters.
This proposal would have massive effects of great complexity, complexities obviously shunned by those who advocate for it because they don’t understand the complexities.
If you like the idea of a flat tax on individuals, that is an entirely different story.