I previously blogged a rather complex idea to make corporate taxes support social services, with the ultimate goal of encouraging job creation.
I think I've come up with a simpler solution: make payroll a tax deduction. All money that companies pay to their employees in pay and benefits is deducted from their taxable revenues. If a company has $10 million revenues and pays $5 million in payroll, they're only taxed on the remaining $5 million.
Further idea but more complex: different tax rates for employers with different employment conditions. Employers that pay less, have fewer benefits, use a greater percentage of contract workers etc. have to pay a higher tax rate, and companies that provide more stable employment get a lower tax rate. Perhaps there could be a grace period of several years for new businesses just starting out, because obviously you can't provide a pension plan when you're two people working out of a garage. I think small businesses could also use the loophole of the owner drawing as a salary any profits the business makes.
4 comments:
I hate to tell you this...but payroll and all other such expenses are deducted from revenue to create taxable income. This is what the entity is taxed on. I don't think you've thought of anything new here, unless I misunderstand what you have wrote.
If they already work that way, how come people keep talking like further tax cuts will be more likely to stimulate job creation?
Are you asking this question sarcastically? This is not a difficult concept, however I will err on the side of caution and assume that you truly do not understand basic business.
Answer: Because right now if companies are struggling with cash flow/losses they might choose to fire employees or not hire employees. Paying less tax frees cash flow and will lessen net losses leading companies to not have to resort to freezing hiring etc.
I'm sorry, I still don't see it. I'm not very good at money stuff, and have never made enough money myself for taxes to be significant, so I can't put myself in their shoes.
If the business is losing money, why would they still be paying taxes? (Like how an individual who makes no money doesn't pay taxes.)
And if they're losing money and they are for whatever reason paying taxes, wouldn't firing people make them have to pay more taxes, because they've lost part of their payroll tax deduction?
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