Modest & Serious Proposal on Business Taxes

[erchess]

All enterprises having a profit motive are "businesses" and all are taxed alike. Terms like Corporation, Sole Proprietorship, Partnership and so on continue to have the meanings they have now except for Tax Purposes.

No Business within the meaning of this policy pays any tax of any kind to any level of government in the US. Not income tax, not property tax, not tax on what it buys. However nothing herein shall be construed so as to forbid state or local requirements for the collection of sales taxes from customers other than businesses.

Revenue is defined as "all the money or other items of value received by the business during the taxable year except contributions from owners and loans from any source whatsoever."

Profit is computed by subtracting from Revenue all "expenses" and any "Contributions to Reserve". All profits must be distributed to the owners and are taxable.

Expenses are actually paid or incurred and meet the "ordinary and necessary" tests under current law.

A business is allowed a reasonable reserve for future plans as is currently allowed to C Corps.

Losses to a business are without tax consequence except of course that there is neither profit nor addition to reserve in years where there is a Loss.

The transfer of ownership interest in a business shall under no circumstances be a taxable event by the United States or any political subdivision but may be subject to the Regulatory Authority of the Federal Government as prescribed by Law or executive decree where allowed by Law.

[DaveO]

Interesting thoughts

What you are suggesting is to treat all businesses much like a REIT in that taxes are not paid at the entity level but most all profits are distributed.

What about the withholding tax? My favorite thing to hate about government is their idea that businesses are just the unpaid tax collection arm of the IRS. I try to explain the "Myth of corporate taxation" to people but am mostly met with blank stares. The elimination of withholding taxes would allow us to starve the beast much quicker.

[Edsel]

Michigan Tried It

A few years ago, Michigan tried eliminating distinctions between corporate, proprietorship, LLC, partnership, etc. tax structures and replaced it with a single entity tax. They called this thing a "Unified Business Tax" or something to make it sound appealing.

You might ask some of our Michigan people how this thing turned out. One of them, (Matt Sova) called it "the world's most ridiculous tax."

By the way, it is amazing how politicians disguise a tax increase by calling it something that sounds good. One of their favorites is "revenue enhancement." I remember a "Fiscal Responsibility Act" and a "Tax Fairness Act."