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

[krw]

No, you're simply lying, again. You do like to do that.

[trader4]

Since when is it a lie that extra deductions reduce the tax that either a business or individual pays?

It's interesting that you have to come up with your own example instead of using the one I already provided which is exactly the same thing, except for slightly different numbers that don't change a thing. I gave you the complete example and asked just a few simple yes or no questions. It would be helpful if you could follow along instead of going off each time in a new direction.

But let's use YOUR example above. As given, the business has depreciation on the truck of $7,140 in the year that they buy it. They wind up paying $18,571 in income tax as you show.

Now, let's look at the same example, but with ACCELERATED DEPRECIATION. Let's say that instead of straightline, they can write off half the cost of the truck the year they buy it. That would be a deduction of $25,000 instead of $7,140. They would have an income of $75,000 and pay an income tax of $15,000. So, instead of paying $18,571, they have paid only $15,000. That $3,571 stays with the business. It's less money that they send to the govt. IT's EXACTLY as both Gfretw and I explained it from the beginning.

You on the other hand retorted with:

"It's really the other way around. The business pays the taxes on the income used to buy the vehicle up front, only to get it refunded in later years. Allowing the business to write off the cost sooner gives them the taxes back, on the money used to invest in their business, sooner. This is where Obama's $250K "rich guy" tax shows its real horns."

Clearly per the above example, the business is not paying taxes on the income up front and then only getting it refunded in later years. With accelerated depreciation they keep that $3,571 to begin with. And it has nothing to do with Obama's proposed raising of taxes. Does everything, even a simple tax issue, revolve around Obama in your mind?

Say what? Forcing you? Businesses would LOVE to have accelerated depreciation on everything. And per this example, the business now pays only $10,000 in tax in the year that they buy the truck. That is $8,571 less than the example using straightline depreciation. I don't know in what convoluted Alice in Wonderland place you live where that equates to the IRS taking $8500 and giving it back over

6 years.

Really? If that's the case, then why did you just claim above that the business doesn't get more money in their pocket now, but it instead is money that goes to the IRS, only to return in future years? Geez....

And another thing. You obviously are clueless about accrual basis accounting. You think it's just some IRS ploy. It's not. It's been done for hundreds of years, before there even was an IRS. It's done to give a fair picture of the finances of a business by matching revenue with the associated expenses of producing that revenue. Without it, you would have wild swings in business income. If a business built a new factory one year, they would have a huge loss. Then in subsequent years, they would have abnormally high profits because the expense of the factory was taken all in one year instead of over 30 years.

And along the way, we have these other gems:

KRW: "The government gets the taxes on the profits made, up front, and then refunds it back over time, rather than allowing some magic "deduction" later. The taxes on the profit have already been collected. That's where people get caught up in the "rich get free deductions" trap.

What the hell does that even mean?

KRW: "Right, but the whole issue of a write off in future years is that the tax is collected UP FRONT on the profits, and then refunded on this year's expenses, in future years. "

Heybub, correctly: ">If you're starting up a company, you would not want to expense items your

KRW: " More examples of government forced suboptimization"

Wrong. It's just correctly matching revenue with expenses under the accrual system of accounting.

Then Gfretw and I pointed out that if you later sell a truck that is depreciated for more than the depreciated value, the business owes tax on it because it's treated as income.

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

Differed payment. "

Differed payment? What the hell is a differed payment? And you have the nerve to call me illiterate? Did you learn about "differed payments" the same place you learned about accelerated depreciation? Recapture is RECAPTURE and it's not a "deferred payment". Anyone who has filed a business tax return knows that.

Now feel free to dig that hole even deeper.

[trader4]

te:

More examples that KRW is clueless. As usual, we have Gfretw, Heybub and I that say you're wrong. No one here is agreeing with your convoluted nonsense. The above is an example of accrual accounting where the expenses of a business are correctly matched to the revenue they produce.

[trader4]

Following that logic, no business would ever come into existence. Heybub already explained that and gave an example. Let's say I start a new business. I put up $100,000. Some friends put up $100,000. We borrow some money with an SBA loan. We use some of that money to buy equipment and a truck. For the first 2 years, we have no sales, no revenue. In year 3, we have revenue, but the business is running at a loss. There is no profit.

So, according to your screwy world, there was no investment. Go figure.

You think the term is "differed tax". You think there can be no investment without a profit. You think with accelerated depreciation a business pays tax today and then gets it back in future years. And I'm the one that is illiterate and clueless? LOL

The usual KRW troll tactic. Instead of explaining what exactly you claim is wrong, you just give a two word answer. The reason is obvious. It's because as usual, you've dug yourself quite the hole and now can't explain it away.

Nothing says the investment in a truck was made out of profits. That is something that YOU are assuming and it's just another example of a mistake made by someone with no accounting or business experience. For example, the business could have borrowed the entire cost of the truck. They could have had a new investor join in that just bought 10% of the business and they could have used that money to pay for the truck. They could have issued new stock. They could have sold 3 old trucks and used that money to buy the new truck.

You're really, really in that hole you've dug deep this time. Feel free to continue making an ass of yourself. Probably time for more name calling too.....

[Douglas Johnson]

That's an impressive business you've got. Profits before buying inventory, equipment, and signage?

No. Investments come from capital. Capital comes from startup funds and, later, profits. If you are lucky.

-- Doug

[HeyBub]

When you, or a company, has no taxable income.

[HeyBub]

To be fair, a successful business could be one in which you bank the revenue before buying the raw materials. Many (most? all? some?) contractors operate that way.

[nestork]

Well, I'm Canadian and I know there are lots of differences between your tax laws and ours. But, I'm sure it's fair to make the following broad generalizations that apply to both countries:

1. The vast majority of corporations in both Canada and the US have only one or two shareholders, which own all the shares of the company. That would include many farms, most commercial real estate, and lots of the small businesses you find on Main Street, Anytown, USA. There are lots of large corporations like Apple, NBC, Dow Chemical, etc. but for every one of those, there's a gazillion "one man shows".

1. Most of the small corporations that have a single director/shareholder capitalize their investments and expense their operating costs and thereby work out the company's net profit at the end of their fiscal year. Then they insert that amount where it asks for "employee wages" or "management bonuses", both of which are tax deductable to the corporations. So, now when you work out the net profit of the corporation, you conveniently come up with a big fat zero for profit. Then, the director and sole share holder of the corporation claim that income on their personal tax return for the year they actually received that pay from the company.

2. The reason it's done that way is that the word "Limited" or the abbreviation "Ltd." in a company's name, or even the abbreviation "Inc." in the company name is there to inform anyone and everyone that the liability of the shareholders of that company is LIMITED to the assets of the company.

So, let's say Joe Blow wants to start his own landscaping business. He can just pay $50 for a business license from the city or state and start doing work for people under the name Joe's Landscaping and Snow Removal Service. But, if Joe goes and uses his backhoe to dig a trench for a retaining wall in someone's back yard, and doesn't bother checking where the underground pipes and electrical cables are buried, and ends up pulling a gas line out of the ground which immediately catches fire and burns down much of the ghetto, then Joe is personally responsible for the damage caused and will lose everything he owns as a result. (Under bankruptcy laws, Joe gets to keep "basic necessities" like clothing, basic transporation (like his 91 Chevy), and his personal home (I think).)

But, let's say Joe goes to city hall and pays $400 to have "Blow Landscaping and Snow Removal Services Ltd." incorporated as a company. Then, if the same thing happens, Blow Landscaping and Snow Removal Services Ltd. is responsible for that damage and all of the assets of the company can be seized to pay for the damage caused. But, Joe's personal assets are out of reach. So, Joe gets to keep his Jaguar, his house in Beverly Hills, his cabin at Lake Tahoe, his yaucht, his LearJet, his collection of French wines, all of his rare art and every red cent in his bank accounts.

So, most people wanting to start a business or buy commercial property which they might not be able to pay for if the economy goes down the toilet are advised by their lawyers to create a corporation, and operate their business through that corporation to protect their personal wealth should they have a really bad day at work.

But, as long as nothing bad happens, Joe can do landscaping work and at the end of every year, Blow Landscaping figures out how much money it's made during the year, and pays it all to Joe as either an employee salary or as a management fee or bonus. That way the corporation submits a "nil" tax return telling the government that it made no profit and therefore owes no taxes, and Joe claims that income on his personal tax return.

Most times, that's how corporations are managed.

[trader4]

Yes, of course I agree with that. But in context, the case we're discussing, where KRW claims I'm lying, was for accelerated versus normal depreciation for a business with profits that is paying income taxes and buys a truck.

I'm sure we're on the same side of that one.

[Douglas Johnson]

The contractor would still need to buy this truck we have been discussing. But I've always taken it as a deal breaker if the contractor wants money in advance. Progress payments sure, but full payment, including his profit, in advance? No way.

-- Doug

[Robert Green]

I call foul. To be fair, let's wonder where this businessman's trucks, tools, phones, business licenses, insurance, etc. come from . . . Hmmm. Seems contractors operate somewhat differently than the model you've proposed for most (all? some?) of them. I can't think of very many businesses not located in the magical kingdom of Heybubbalonia that operate on a "bank the revenue before buying raw materials" model.

In fact, most smart customers refuse to pay the whole bill up front and will only advance partial payments to the contractor to purchase materials. An unfortunately more like scenario for many contractors is that they're already in the red when a deposit/down payment comes in for a new job so there's not much (very little? none?) "bankable" revenue left, especially when you consider that the contractor *should* be buying the materials required for the job with that down payment. That's why people are reminded of the dangers of dealing with unlicensed contractors. There's a rich tradition of them taking deposits but never actually buying supplies or doing the work.

I've had several businesses and they all required substantial upfront investments. Photography required lots of cameras, lenses, filters, tripods, lightstands, (and back then film), darkroom gear, carrying cases, studio flash gear, blank invoices, printed contracts, business cards and advertising costs. Computer consulting required computers, compilers, copy machines, cd duplicators, coursework fees, carrying cases and much, much more. What business do you know of that actually operates as you propose?

Tools, operational costs, meals and much more have typically *always* been borne by the contractor until the job is complete, and even then, the profit on any one job rarely (sometimes? ever?) pays for all the equipment and other costs involved. IOW, it's a pretty weak argument you're advancing and it's one that Trader and Gfretwell have pretty thoroughly debunked.

They both won this "case" hands down because of their accurate description of "differed" (sic) costs, recapture, depreciation, etc. If that weren't enough, KRW admitted defeat by resorting to his standard middle school insults. As Trader quite astutely noted, that is KRW's "tell" when he's trying to make a pair of deuces sound like a royal flush.

-- Bobby G.

[trader4]

Given that corporations cover a range that runs from Apple to that local landscaper, generalizations about "most" aren't very useful, are they? And regardless, even the example you gave of the local landscaping company, the same rules of accelerated depreciation for that truck they buy allows them to write if off faster, subjecting less to tax. It provides them with exactly the same incentive to buy a truck as it does Apple.

Here in the USA that landscaping corporation also has no need to pass the profits through to the owners with regard to taxation, not showing a profit, etc. The landscaping company would simply elect Subchapter S tax status, whereby the companies income is divided up for tax purposes among the owners and tax is paid by them on their personal returns, as if it were their own personal income, whether they receive the profits or the profits remain with the corporation.

[dpb]

And, if it is actually taken as salary it's also subject to SSI tax (and remember as the single stockholder he's paying both "halves" directly for a total rate of 13.5%).

And, it doesn't really matter which place the income is taxed unless you're one who thinks it should be double-taxed as _both_ corporate _and_ personal income...

...

If one has any hope of anybody taking any chances of doing anything economic activity then on had better hope for such a situation. Who, in their right mind, will for a long term take such risks for themselves and particularly their families? Simply stupid to do so and tax codes universally recognize such...

...

Correct on both points...while Apple is a current popular whipping boy, they still paid some $2-3 b (w/a "B") in corporate taxes--that they use the tax rules as written to minimize their exposure is to their (and their stockholders') benefit and leads to their having increased chances of continuing to be able to support the kinds of innovative research and development that made them what they are...penalize that excessively and kill the goose that laid the golden egg is a likely outcome.

And, the US IRS is very observant on how one or low-numbered stockholders S-corps report dividends vis-a-vis wages and retained earnings and pressing the envelope is a very good way to generate an audit...

--

[dpb]

...[over-generalizations elided for brevity]...

IOW, they are managed w/ the thought of managing their assets to their best advantage within the rules as laid out.

What you need to do is to request for revisions to tax _code_, not rail against those who simply respond to what rules they're required operate by.

As noted in other response, expecting personal liability for business is simply unrealistic if one has any hope at all of there being any economic activity at all.

Single-engine aircraft is a perfect example--back in the 70s-80s there was a veritable plethora of outrageous suits against manufacturers (Cessna, Beech, Piper, etc.) in the US and as a consequence there was a subsequent period of some 20 yr or so that there simply were no manufacturers in the US who were willing to take those financial risks any longer and the single-engine aircraft industry in the US came to a complete halt costing thousands of jobs and an inestimable loss of economic activity as a direct result.

--

[trader4]

Mother Jones dug up some old Romney video from the 80s around the time Bain Capital was founded. It has Romney explaining that Bain was being formed to make investments in start-ups and existing companies where they could use their business consulting expertise to add value and make those companies successful. He then says the goal is to harvest those investments in a 5 to 8 year time period.

Now, to you and I and anyone that understands capitalism, that sounds like a very reasonable plan and a good one for the economy and America. But Mother Jones thinks it's a damning indictment of Romney. But the most illustrative part to it is I saw former Labor Secretary Robert Reich on MSNBC. And he's condemning the Romney video, saying what Romney means is that he's going to fire a lot of people, squeeze labor costs, for short term gain. Did that happen at Staples? Sports Authority? Steel Dynamics?

Now, I ask you this. How much damage do you think a jerk like Reich did when you put someone of that ilk in charge of the Dept of Labor? And how many similar termites do you think Obama has eating away at the core of the American economy right now? And then with GDP growing at 1.2% we're supposed to keep believing that Obama's plan is working......

[krw]

Where did your money come from? Obama?

Where did the capital come from, dummy?

[krw]

[..../] IRONY

[trader4]

It doesn't matter where the capital came from. How about Uncle Abe dies and leaves Johnny $100,000. Johnny takes that and borrows $100,000 more against the equity in his house. He starts a business and buys a truck for $25,000 putting $5,000 down and taking a loan for $20,000. Now explain to us how the accelerated depreciation for his truck is different than the accelerated depreciation for any other business. Does the IRS have a different form for Johnny to figure out his deduction on? Like many businesses, the source of funding for the truck isn't traceable directly to profits as you insist. In this example, it came from inheritance, home equity and a loan on the truck. With other businesses it may come from loans, accumulated profits, new investors, new sale of stock, the sale of other assets, etc. And the specific source isn't even identifiable, for obvious reasons. It's like the owner of the local bakery taking $20 out of the cash register and buying a cake pan with it. Where did that dollar come from?

And of course it doesn't matter because it has nothing to do with accelerated depreciation. Accelerated depreciation just means that a business gets to take depreciation on an asset faster than they normally would. That let's them pay less in taxes in the year the asset is placed in service. It means they will have less depreciation for that asset in future years. Accelerated depreciation does not work like you claimed:

"It's really the other way around. The business pays the taxes on the income used to buy the vehicle up front, only to get it refunded in later years. "

[Douglas Johnson]

Name calling again. What are you trying to accomplish? It doesn't improve your arguments.

But the capital could have come from savings from my wages, my social security checks, my uncle, bank loans, bank robbery, or yes, profits from some other business.

-- Doug

[HeyBub]

Ve haf our vays!

The IRS bothered the hell out of my ex-boss for taking too large a salary from his private corporation - they wanted to tax the profits twice.

He set up five separate sole proprietorships to extract money from the corporation. For example, he personally owned all the computers and leased them to the company. The corporation sold the building we were in to him and he rented it back. And so on.

Screw you, IRS.