I paint houses—very small time, one man operation any more. I should pay income tax on that portion of my gross income that goes into paint, caulk, etc? That’s not income.
And people in other trades, their jobs might have a much higher percent of the total job go to materials and supplies. Plumbers or electricians, for example. One guy might pay 20% of a job in materials, another guy might pay 6o? So by your plan, they should both pay income tax on the same amount. Say a $1000 job, to keep the math simple. One guy makes $800 after materials, the other guy makes $400, but they both pay income tax on $1000.00? Doesn’t make any sense, and it is patently unfair.
Tools and equipment, I’d listen to your argument, but I doubt you’d sell me on that one, either.
I think I just talked myself into some variation on the “Fair Tax” after the 16th amendment is abolished, of course.
You can either put a markup on your inputs (and pay taxes on this margin), or have the customer pay for the inputs directly and you’re providing the service.
The problem in this tax debate is that so many people’s mindsets have been permanently altered by the current tax system that they simply cannot see any other way of doing business. You’re setting an example here.
My point is that if we eliminate all deductions, the business community will adapt (and rather quickly) to the new system. The beauty of small business in the US is that we are so adaptable. We don’t want to spend any more time on this crap than necessary, and I completely understand that. But we will adapt. The crux of the matter here is to get something that a) generates the required revenue without being odious upon business and b) something in which Congress cannot play games any longer.
Here’s the real crux of the problem: If you have even ONE deductible segment of the economy, others WILL be trying to get their segment’s outputs or inputs deducted as well. As soon as you start down that road, we’ll be back where we are in no time at all. Here’s an example: 80 years ago, home mortgages were rare. The “mortgage deduction” came about because Congress allowed FARMERS to take an interest deduction for loans on farmland in the 1920’s in order to encourage wheat production after WWI. This was part of the whole package of stupid that Congress and the banks built on the plains that became known later as “the Dust Bowl.”
The thing that people miss here is that the power to hand out deductions, breaks and loopholes is what gives the clowns in Congress their power. I want to take that away from them. I want Congress out of my life as much as possible. To that end, I want a tax system where they have no favors to give away. I’d also like to ban all central air conditioning on federal buildings, so as to make working for the federal government at any level as unpleasant in the summertime in DC as possible, but that’s another rant of mine.
If people really want a different tax system, one which is both less complex and gets Congress out of their business, then they have to let go of how they’ve structured their business or life around the current tax system. I know what this is like. I’ve run a business. I structured our business to take advantage of as many tax breaks as I could. I very successfully exploited one loophole after another to minimize our tax liability.
I’d give up all of those loopholes in order to a) take the power away from Congress and b) quit spending so much of my time studying the Internal Revenue Code for these “gifts” to the public by Congress.