Dispatches from a Small Business
...is my corporate Federal and multi-state tax return.
The enterprise-killing nature of taxes isn't just the money.
That's the best illustration of the term, dead weight loss, I have ever seen. How many private and public work hours have gone and will go into processing that boat anchor? Sometimes I think that academics economists fail to take full account this regulatory burden (linked economists excepted). The environmentalists should be furious at all of the trees sacrificed for a report that will get filed somewhere, never to be seen again. Unless, the government decides to make your life miserable.
The most cancerous "industry" in the United States is the tax preparation and avoidance industry, from the lawyers at the top all the way down to rapid refund kiosks. A rational, simplified tax code would return billions and untold productive time (not to mention leisure, which is valuable of itself) to the economy and to Americans in general.
Which is one of the reasons we'll never have it. A multibillion dollar aggregation of parasites would be left destitute.
Ah, Patrick, well said. I long for a simple tax - be it on transactions, be it flat or progressive, all I really want is simple without exceptions.
Try selling your meager dwelling now, commoners!
Itâ€™ll take thrice the documentary evidence just to get your agent to call you back on the voice telegraph.
try having piles of diverse investment income. my personal return is bigger than that and it's only for one state.
I agree with Patrick.
The howls of agony from all those who earn their living from interpreting the tax code would kill any interest in real simplification, a fair tax, or any such thing.
Everyone from software writers (TurboTax, etc.) to accountants to attorneys... Howls of outrage at how "unreasonable" the simplification is...
A great illustration of the tax burden placed on individuals and businesses. Want to venture a guess as to the number of pages that comprise the Federal tax code, revenue rulings, IRS notices, tax/case law, both state and Federal? Hundreds of thousands. The complexity is beyond any single individual's ability to comprehend. Businesses that operate in multiple tax jurisdictions have little chance of filing a fully compliant tax return. Then consider the need to comply with OSHA, trade laws, SEC rules, FASB guidelines, EPA regulations, FTC, FAA, FCC, and every other bureaucratic entity formed for our benefit. Gee whiz, enough already
And just wait til you have to start sending in 1099s for business to business transactions
above $600 in a few years, and 5-10 years down the road justify the ones you have received
3 years prior.
I don't always agree with you, but I respect that you maintain this excellent blog and run a business. Were I in your situation I fear I would be tempted to not spend the time or risk the aggravation on this kind of blog. Keep it up!
I had a vaguely successful "vanity" self-publishing LLC. I broke even on the company selling a Hebrew Bible I typeset myself (and possibly provoking the controllers of the BHS to publish an under-$30 copy of the BHS). I made a few bucks publishing two novels for a friend (I don't know if she ever broke even, but her husband considered it money well spent).
Nonetheless, I closed it down at the end of last year, because of taxes. The state was going to charge me around $200 to stay open, and the county was dropping a $100 license fee on top of that. With my profit margins, I would have to publish 4-5 books a year just to pay for the taxes, and there aren't that many vanity books in Lexington.
And I consider myself lucky that I never had to get an accountant.
Two of my friends from high school created their own greenhouse business in upstate NY. They were very successful and went from one to five greenhouses in a few years. (They used self-designed automation and were written about in greenhouse magazines.) However, they stopped expanding. Why? Because further expansion would require them to have five or more non-family employees. New York State imposes heavy burdens on those who employ five workers, and my friends would have needed to contract with or hire part-time an accountant and a personnel manager. The extra costs would have consumed all the profits of a sixth greenhouse.
NYS has such horrid business licensure and operating regulations and such high income tax, sales tax, and payroll tax rates that it is ranked #50 in economic freedom.
Yes, but I have a vested, defined benefit pension at a paper company, so all that paper is good for me.
That picture is the reason why I work for a salary instead of starting my own business after I earned my MBA.
Folks, the Fair Tax (HR25 and S25) is the answer to our existing national tax issues. It really solves all of our problems and brings back the jobs and capital that have been lost over the past 40+ years. It replaces ALL federal taxes that exist today and is revenue neutral (or it was until ObummerNoCare was passed). I urge everyone to get on board with this and don't let the liars and detractors feed you incorrect information - read the pending legislation which can't get out of committee because of the Dumocrats. Also, do your own math - many detractors confuse the points of inclusive tax and exclusive tax in an attempt to discredit the priniciples of how it would actually work. Also, research the origin of the original idea which came from the very brightest minds available after much work. Most politicians are against it because it is so transparent and doesn't give them ways they can fiddle with things and cut special deals (i.e., eliminates many lobbists, the IRS, and tax attorneys). There is no more withholding taxes, Social Security taxes, Medicare and Medicaid taxes, excise, death, etc. and workers get their TOTAL pay. There is a prebate provision that gives EVERYONE a check at the beginning of the month to take care of the taxes paid on the initial purchase of necessary goods and services up to the corresponding poverty level for each household which takes care of the people who can't and don't pay tax. When passed, it will require drug dealers, illegal aliens, visiting foreigners, pimps, prostitutes, scammers, crooks, and the underground economy to pay taxes! It brings back jobs because the US would then be on a level playing field with the rest of the world in terms of costs of production since the tax only applies to the retail sale of NEW goods and services - i.e., business would not pay any tax which it doesn't now - corporate taxes get passed on to the ultimate consumer through pricing. The goods and services we have now would cost about the same even with the new tax. CHECK IT OUT YOURSELF AND THEN GET BEHIND IT!!!
I've become cynical. My first impression is, anything that's been officially labeled "The Fair Tax" obviously cannot be. (Fair, that is.) That term's been co-opted away along with "The People's Republic of . . . " I see a country name beginning with "The People's Republic . . . ", and I already know the People are screwed.
(Tax lawyers aren't the cancer. The tax system is. Without the lawyers, the system would just take more of your money.)
I hate to say this, but this is not even close to the monster U.S. corporate tax returns I have seen when I worked for the IRS. The corporate tax department had an office pool to guess how much it would weigh - a lot more than four pounds.
One year's Form 1120 U.S. income tax return was over 4,000 pages long attributable mostly to Forms 5471 for corporate foreign entities. The taxpayer usually made a complete copy of the return for the IRS examination team because we always kept the original filed return in the office in the event it was needed for trial. Now multiply that 4,000 pages by three since we usually examined three years in each examination cycle. This should give you but a small picture of how labor intensive tax preparation is for very large corporations.