Semi-OT - CBO: Electric cars are not cost-effective

[harry]

True.

[HeyBub]

Huh? That's crazy talk.

Solyndra didn't "make" a dime but spent a BIG pile of cash.

If I get a loan to start a business, it may be YEARS before I "make," or even take in, any money.

[trader4]

That's for sure. Or even an ordinary income tax return. Anyone who does knows that extra deductions REDUCE the tax you pay. You don't have to send the money in then get it back in some future year, as krw claims. That's the whole point of accelerated deduction. To give business more money in their pocket NOW and an incentive to buy the eqpt now.

[trader4]

How exactly does the govt get the taxes on the profits made up front and refund it back over time? There is no magic deduction later. The accelerated depreciation deduction is taken when the truck is bought and consequently less tax money is sent in to the govt right then.

Let's say it's the second quarter of the year. I figure out all my revenue and expenses. One of those expenses would be normal depreciation on a $25,000 truck that I just bought. Let's say that depreciation was $5,000. After all the revenue and expenses, including that normal truck depreciation, I have a taxable profit of $100,000. Let's say I'm paying tax at a 30% rate. I would send the govt a check for $30,000 for the estimated tax payment for that quarter.

Now instead, let's look at what happens when the govt has an accelerated depreciation allowance for that truck. Now instead of writing the truck off over say 5 years, the allowance lets me write it off faster, let's say in just one year. So, instead of having a $5,000 depreciation on that truck in the the current year, I now have a $25000 deduction. Now my taxable business profit is not $100,000, but $20,000 LESS, or $80,000. Paying tax at a 30% rate, I send the govt a check for $24,000

Instead of paying $30,000 in tax, I just paid $24,000 That is how accelerated depreciation works. That $6,000 stays in the business checking account.

Already collected by whom? As a business you send in quarterly estimated tax payments based on what you estimate you owe. That expected amount includes any deductions you are entitled too, including the accelerated depreciation under discussion. The only way the taxes would have been collected would be if you yourself were dumb enough to send in more than you had to. And even then, you'd be entitled to it back as soon as you file the return at the end of the year. Or if you made a mistake and realized it, you could also just send in less with the next estimated quarterly payment and recover it the very next quarter. The same applies to individuals that have to file quarterly estimated taxes so the comments on the rich don't make any sense either.

I have. Per gfretw, it's obvious you haven't filed quarterly taxes and have no idea how accelerated depreciation works.

That is totally convoluted and wrong. Per the example above, that is not how it works.

And that in turn results in the business paying LESS TAXES in the year the truck was bought. Not tax money refunded in later years. Less tax money PAID in the year the truck was bought.

Again, paid by whom? You calculate profits and make tax payments quarterly. You'd have to be pretty dumb to send in tax money that you don't owe because you have the extra deduction for the truck.

And as usual, being completely wrong, you start with the snide comments. Typical. Very typical. Now instead of admitting you're wrong, you're going to dig that hole very deep and start with the name calling and vulgarity.

[trader4]

=A0 =A0 =A0 ^^^^^^^^^ ????

Typical. As predicted, the argument is lost, so now it's on to the name calling.

You clearly don't understand even basic accounting concepts. Among your foolish ideas is apparently that it would reflect reality and be accurate to immediately expense all assets that are bought. That is NOT how accounting is done and it is not purely tax issue either. If you expensed assets immediately it would not give a true reflection of profits or the state of a business. Businesses would suddenly have wild swings in income and losses that would not represent the true condition of the business. If a business bought an expensive piece of equipment or built a new factory, suddenly they would go from having a nice profit the prior year, to showing a big loss this year. How would that look to investors, lenders, etc? Instead accounting 101 recognizes that the correct way is to DEPRECIATE the asset over it's useful life. Try taking accounting 101.

[gfretwell]

There is also that recapture problem.

Even in the case of the truck. When you fully depreciate it in year one, you better drive it until the wheels fall off because when you sell it, the sale price will be taxable. (recaptured depreciation).

[trader4]

Yes, which is another effect that is the OPPOSITE of what krw claims. He was claiming you pay tax today and get it back later? With accelerated depreciation on the truck, you get a big deduction immediately, perhaps for the cost of the whole thing, which saves you tax immediately and you then have either smaller or no deductions for truck depreciation in subsequent years. And as you point out if you later sell it for more than the depreciated value, you have a taxable gain on it.

I think his main problem is that he's confused with accrual accounting versus cash basis accounting.

[krw]

Right, another example of government forced suboptimzazion.

Depending on your business, rules vary.

No issue. The difference is a profit.

[krw]

If you think the argument is lost, you're as dumb as you pretend.

Sorry, you're the moron, here.

They are expenses paid out of profits or borrowed against tomorrow's. Tax law makes it much more profitable to do the latter (or rent). More government forced sub optimization.

Actually, it is. Large corporations carry capital equipment on their books the same as cash. It's another government forced sub optimization.

Wrong.

They do that now.

A government forced sub optimization.

[krw]

It's not a problem. The recapture is simply a differed tax payment.

Differed payment.

[krw]

There you go lying again.

Fact.

No, it's a differed tax.

I know you're totally confused.

[HeyBub]

If you're starting up a company, you would not want to expense items your first year when you have no sales. You'd want to depreciate them over the upcoming years when you have some actual revenue.

[gfretwell]

You are right that it is basically a free loan from the government but you need to know you will be owing it to optimize your quarterlies (or quarter lies if you are cheating) ;)

[trader4]

No lie. You claimed over and over again how a business must pay the tax on the truck they bought this year and only get it back in subsequent years. That is indeed the opposite of how accelerated depreciation works.

See, you just did it again! And that is in fact the OPPOSITE of how it works.

Differed? You mean deferred? It's not that either. It works exactly as I described.

Another one of your obvious problems and issues is in evidence. You refuse to address your claims in a way that explains and illustrates. I've pointed this out to you before. I went through an example of accelerated depreciation on a truck, complete with numbers. Instead of addressing that, point by point, saying whether it is indeed correct or where you disagree, instead you ignore it and instead come back with 4 word replies and insults.

But you can't get away with it. Not here, not today. Here is the example again:

The accelerated depreciation deduction is taken when the truck is bought and consequently less tax money is sent in to the govt right then.

Let's say it's the second quarter of the year. I figure out all my revenue and expenses. One of those expenses would be normal depreciation on a $25,000 truck that I just bought. Let's say that depreciation was $5,000. After all the revenue and expenses, including that normal truck depreciation, I have a taxable profit of $100,000. Let's say I'm paying tax at a 30% rate. I would send the govt a check for $30,000 for the estimated tax payment for that quarter. That represents the best estimate of the amount of total tax I owe. Any difference is then resolved at the end of the year when the actual return is filed.

Now instead, let's look at what happens when the govt has an accelerated depreciation allowance for that truck. Now instead of writing the truck off over say 5 years, the allowance lets me write it off faster, let's say in just one year. So, instead of having a $5,000 depreciation on that truck in the the current year, I now have a $25000 deduction. Now my taxable business profit is not $100,000, but $20,000 LESS, or $80,000. Paying tax at a 30% rate, I send the govt a check for $24,000

Instead of paying $30,000 in tax, I just paid $24,000 That is how accelerated depreciation works. That $6,000 is kept by the business. It's not sent to the govt and refunded in later years.

That is how accelerated depreciation works. Gfretw told you the same thing. Now, if you disagree, instead of 4 word answers and insults, simply explain where you disagree with the above example.

[trader4]

That must be one of the terms you learned in the accounting class you never took. "Differed payment". What you mean apparently is "deferred payment" and that is NOT what it is. As Gfretw correctly points out, if you depreciate an asset and later sell that asset for more than the depreciated value, it's a "recapture".

But keep digging your hole deeper.

[trader4]

As always, the argument being lost, the name calling begins.

More convoluted nonsense. The issue is how accelerated depreciation on a business truck works. I provided an example, complete with numbers. Here it is again:

The accelerated depreciation deduction is taken when the truck is bought and consequently less tax money is sent in to the govt right then.

Let's say it's the second quarter of the year. I figure out all my revenue and expenses. One of those expenses would be normal depreciation on a $25,000 truck that I just bought. Let's say that depreciation was $5,000. After all the revenue and expenses, including that normal truck depreciation, I have a taxable profit of $100,000. Let's say I'm paying tax at a 30% rate. I would send the govt a check for $30,000 for the estimated tax payment for that quarter.

Now instead, let's look at what happens when the govt has an accelerated depreciation allowance for that truck. Now instead of writing the truck off over say 5 years, the allowance lets me write it off faster, let's say in just one year. So, instead of having a $5,000 depreciation on that truck in the the current year, I now have a $25000 deduction. Now my taxable business profit is not $100,000, but $20,000 LESS, or $80,000. Paying tax at a 30% rate, I send the govt a check for $24,000

Instead of paying $30,000 in tax, I just paid $24,000 That is how accelerated depreciation works. That $6,000 stays in the business checking account.

Now that is how I say accelerated depreciation works. IT's how Gfretw says it works. What say you? Is the above correct or not? Yes or no?

And note that it has nothing to do with paying taxes today and then getting them back in subsequent years.

Keep digging your hole deeper. Corporations do not expense eqpt when they buy it. The DEPRECIATE it, just like the truck example. And you apparently think this is purely a tax issue. As I pointed out, it's not. It's an accounting issue to accurately reflect the true profit and loss of a business. Under the accrual system of accounting, which all large corporations use, the accounting goal is to match revenue with expenses associated with those revenues. If you build a new factory, fill it with eqpt, it's depreciated over the useful life of the asset so that the expense is matched with revenue over those years that it generates. The same thing with the truck. That way, you get a true picture of the profits and losses of a business. Without accrual accounting, businesses would have wild fluctutations in profit and loss that do not reflect reality. Capiche?

Keep digging your hole. So, let's say a corporation builds two new major factories and fills them with expensive eqpt. They will be used for the next 25 years. Under the accrual system of accounting, which is what they actually use, the cost of those factories is taken as a depreciation expense over the next 25 years. Each year they take as an expense a portion of it. If it's straightline, then beginning with year one, they would take an expense for 1/25th of the total cost. In year one, presumably they also have revenues, so the cost is offset against those revenues. The business winds up with a normal year, normal profits.

Under your proposed system of cash accounting, the corporation would have a horrific loss in the year they built the factories because the cost would wipe out all their profits. And the next year, they would have an abnormally large profit, because the cost of the factories is totally absent even though they are using them to produce revenue. T he profit and loss would swing wildly and it would NOT represent an accurate picture of the financial condition of the corporation to investors, lenders, tax authorities, etc. This really is the first day of accounting 101.

Per the above, that is not true because they use accrual accounting, not cash basis. Have you ever even read a corporate annual report with financial statement?

But keep digging that hole.

It's not an issue of govt sub optimizing anything. It's an issue of accounting to accurately reflect the true financial situation of a business. That has been going on for hundreds of years.

"Definition of 'Accrual Accounting' An accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur. The general idea is that economic events are recognized by matching revenues to expenses (the matching principle) at the time in which the transaction occurs rather than when payment is made (or received). This method allows the current cash inflows/ outflows to be combined with future expected cash inflows/outflows to give a more accurate picture of a company's current financial condition. "

[krw]

There you go again. Lies on lies.

Actually, you do. I'll spell it out for you, since you're dense as a stump, and a liar, to boot.

Assume sales of $200,000 Direct expenses -$100,000 Gross profit =$100,000

Now assume you buy a truck $50,000

Example #1 (Depreciation) With straight line depreciation -$7,140 deduction for the 7 years Taxable income $92,860 Tax (~$20%) $18,500 (year 1) Return (~20% of 7,140) $1,430 (years 2-7)

Example #2 (expensed) Assume the truck is expensed: -$50,000 Taxable income $50,000 Tax (~20%) $10,000

Result: By forcing you to depreciate the business expense, the IRS is taking $8500 the first year and giving back $1430 for six years.

No shit?! You really can't read. BTW, accelerated same year

[krw]

More examples of government forced suboptimization.

[krw]

You really are stupid. That's *exactly* what happens. Se my previous post.

Wrong. Profits come first. Investments come from profit.

It certainly is.

You haven't a clue.

Evidence? You're an illiterate fool.

You simply can't read. I can't help you, there.

You screwed it up, too.

Idiot. I can't help it if you can't read.

Accelerated instantaneous.

See my example. You're wrong.

That's exactly what I'm saying, idiot! By *not* allowing the business to expense the investment that was clearly made out of profits, the government is taking too much tax, calling the investment income, and then refunding it in subsequent years.

No shit. You really *can't* read.

You're an idiot.

[krw]

No, it isn't a free loan at all. You invested the money and wrote it as such on your taxes. When sold, you made a profit (investment taken out of the business) so it's taxable. No one loaned anyone money, unless you look at all money being the government's.