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  #21  
Old October 14th, 2011, 11:28 AM
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A VAT is passed on to consumers. A corporate income tax is not as it is a tax on income. A company prices such that they maximize earnings. The math cannot include corporate income taxes as this would de-optimize the pricing calculation. A company is not trying to make x dollars. It is trying to make as much as it possibly can, and prices are set accordingly. Set the price too high, and volume drops. Makes no sense to include the tax on net in this determination.
  #22  
Old October 14th, 2011, 02:50 PM
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A VAT is passed on to consumers. A corporate income tax is not as it is a tax on income. A company prices such that they maximize earnings. The math cannot include corporate income taxes as this would de-optimize the pricing calculation. A company is not trying to make x dollars. It is trying to make as much as it possibly can, and prices are set accordingly. Set the price too high, and volume drops. Makes no sense to include the tax on net in this determination.
I don't know about that. I think it is a rationalization. I guarrantee that if cost goes up they try to recoup it somehow. How is loosing a percentage of what they make not raising cost. The biggest corporations will overpay an expert who will raise prices, cut employees and slash benefits. The corporation will have an even higher profit than before and the hit man whose handy work screwed everyone but the bottom line and the government cut will get a 6 or 7 figure bonus.

The corporations are owned by shareholders. If the corporate profits are taxed they shouldn't be able to tax growth or income on stocks that shareholders own. They would have already paid the tax on their corporation's income. You know taxes are way out of control when they start trying to come up with ways to tax the same income multiple times. They want to tax your corporation when you make it. Tax you when you get the money you made and tax you when you spend it. So you make a dollar. The government gets 15% in corporate taxes so you really made $0.85. You get payed from your corporation and you get taxed 20% so it is $0.68. Now the state and local governments want the same amount so you are down to $0.51. Now you spend it and get taxed from 6 to 14% leaving you from $0.44 to $0.48. Now with what you have left you have to pay the tolls , fees, property taxes, sin taxes, container taxes, special assessments, insurance, etc. Your buying power with YOUR "dollar" is nonexistent. No wonder we are in so much trouble.
  #23  
Old October 14th, 2011, 02:52 PM
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I think it is more a straw man. I cannot envision it as a simplistic 999 across the board. For example. the 46.2 million Americans who are considered in poverty would have to be exempted. Also, the capital gains of corporations would become ordinary income and be taxed at 9%.

I don't like it, even if it could be made fair, because as someone said before, it will only escalate over time and then we'll be saddled with both an income tax and a national sales tax that are too high, similar to Great Britain. Also, some states already have a large sales tax-- isn't CA 11% or something? Then they would have a 20% sales tax.

I am one of those who believes that corporate tax is a misnomer, since corporations pass these tax costs on to consumers. But, with that in mind, why not eliminate the individual income tax altogether and just tax the corporations/businesses. It will amount to a consumption tax, so that whatever we buy would be more costly, but then, we would have more money in our pockets to buy the pricier products. Of course, certain products like food would either have to be off-limits, or some law put in place to protect the poor and lower incomes who have little or no discretionary income. The customer base would have more money to spend, and government could use raising and lowering the corporate tax to effect business stimulus during recessionary times. I haven't thought it all out, but it may be an idea worth considering. Before the income tax came into existence, the US collected money through tariffs and tax on businesses, so it's an old idea that has worked in the past. [Waiting to be bludgeoned to death.]
Aslan, you are brilliant. Aslan for President 2012.
  #24  
Old October 14th, 2011, 02:54 PM
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Originally Posted by QFIT View Post
A VAT is passed on to consumers. A corporate income tax is not as it is a tax on income. A company prices such that they maximize earnings. The math cannot include corporate income taxes as this would de-optimize the pricing calculation. A company is not trying to make x dollars. It is trying to make as much as it possibly can, and prices are set accordingly. Set the price too high, and volume drops. Makes no sense to include the tax on net in this determination.
I wouldn't say it makes "no sense." That's the way it was before the individual income tax. Everything cannot be thought of in terms of the pricing calculation. People would have far more cash at their disposal if they were not taxed and therefore could afford to pay the higher prices. It would only be hard going until people got used to the higher price level.

Yes VAT is clearly passed onto consumers, but every accountant knows that all corporate expenses, including income tax expense, is passed onto consumers. A tax on corporate income is essentially a pass-through. In addition, tariffs would have to be set so as to avoid price undercutting by foreign products. It's about time we did that anyway. We buy from other countries, but many of them put tariffs on out exports so as to make them cost prohibitive. I'm playing Devil's advocate.

I would support a VAT, or better yet, a national sales tax, if the income tax were first abolished.

Last edited by aslan; October 14th, 2011 at 03:00 PM.
  #25  
Old October 14th, 2011, 03:00 PM
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Every accountant hopes that every "expense" is passed on. BUT, income taxes, dividends, stock buybacks, etc. are not expenses. It makes no sense to "pass on" a cost that only exists after gross income is calculated. That would just screw up the pricing calculations. Any tax that might be charged before income is calculated, like real-estate tax, WOULD be passed on.
  #26  
Old October 14th, 2011, 03:12 PM
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Every accountant hopes that every "expense" is passed on. BUT, income taxes, dividends, stock buybacks, etc. are not expenses. It makes no sense to "pass on" a cost that only exists after gross income is calculated. That would just screw up the pricing calculations. Any tax that might be charged before income is calculated, like real-estate tax, WOULD be passed on.
I beg to differ. Income tax is an expense, and generally labeled "Income tax expense" on the books. Now you may like your net income figured before income taxes, some show before and after, but it has every element of an expense, pure and simple. Those equity transactions are a different story.
  #27  
Old October 14th, 2011, 03:29 PM
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I beg to differ. Income tax is an expense, and generally labeled "Income tax expense" on the books. Now you may like your net income figured before income taxes, some show before and after, but it has every element of an expense, pure and simple. Those equity transactions are a different story.
This is why accountants report EBITDA. Taxes are removed, as well as other items that can distort some calculations. I've never been in a pricing discussion that involved income tax as a factor, and I certainly have never used it in prices I've set. Makes no sense to me at all. GE pays no income taxes. Are you saying they would raise the price of washing machines if they did? They can't. The prices are set according to the competition, their capacity and what they think the market will bear. What difference do accounting tricks that removed their taxes have to do with how they price washing machines?
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Old October 14th, 2011, 03:41 PM
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Every accountant hopes that every "expense" is passed on. BUT, income taxes, dividends, stock buybacks, etc. are not expenses. It makes no sense to "pass on" a cost that only exists after gross income is calculated. That would just screw up the pricing calculations. Any tax that might be charged before income is calculated, like real-estate tax, WOULD be passed on.
THey want at least a certain return on investment. If your target is x you are taxed 15% on your profits, you would simply add 17.65% to your profit figure and add it to your costs to set the price. That is not complicated.
  #29  
Old October 14th, 2011, 03:47 PM
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This is why accountants report EBITDA. Taxes are removed, as well as other items that can distort some calculations. I've never been in a pricing discussion that involved income tax as a factor, and I certainly have never used it in prices I've set. Makes no sense to me at all. GE pays no income taxes. Are you saying they would raise the price of washing machines if they did? They can't. The prices are set according to the competition, their capacity and what they think the market will bear. What difference do accounting tricks that removed their taxes have to do with how they price washing machines?
A company that pays no income tax can either lower its prices, all things being equal, undercutting its competition, or simply take extra amounts into income over other companies, perhaps paying greater dividends. If they do begin paying income taxes, something will have to give-- lower profits or they may be forced to raise prices to maintain profit levels after taxes.
  #30  
Old October 14th, 2011, 03:51 PM
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This is why accountants report EBITDA. Taxes are removed, as well as other items that can distort some calculations. I've never been in a pricing discussion that involved income tax as a factor, and I certainly have never used it in prices I've set. Makes no sense to me at all. GE pays no income taxes. Are you saying they would raise the price of washing machines if they did? They can't. The prices are set according to the competition, their capacity and what they think the market will bear. What difference do accounting tricks that removed their taxes have to do with how they price washing machines?
I recently purchased a dishwasher. The prices ranged from a few hundred dollars to well over a thousand dollars. Are you seriously telling me that there is no wiggle room in there to include the tax? Change the facade a little and charge 17.65% more on the profit line of price setting to pay for the 15% tax on profit and make a cheaper facade and everyone will perceive it as an improved model. Most people are trained that more expensive is better quality. They are clueless as to reality. Unless it is the most expensive model it will still be in the price range for dishwashers.
 

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