Monday, November 22, 2010

A Real Business Sense

From the Comments of the previous post that should be brought to our attention:
Egg Farmer needs to clarify... It is section 179 depreciate, not accelerated depreciation that is a problem. Section 179 allows businesses to completely write off a new piece of equipment. The state of minnesota does not allow the deduction or only a portion of the total amount the federal section 179 allows. If a business person cannot take it both on the federal and state, what is the point... In our case we don't take the full amount of section 179 tax deduction, because it doesn't help on the state tax return. Of course, my good friend across the state line can take the section 179 both on the state and federal tax. All these different tax deductions and/or incentives that are given to businesses I understand (we take advantage of as many as we can). The problem is that the playing field becomes uneven. I am not arguing that the government should some how make it "even" or "fair" for all, because innovation and technology will always disrupt the playing field. What I think the role of government can or should play is to use its limited resources in shaping a better playing field (better infrastructure, simplifying the tax code and security), which would benefit all.
A few thoughts. First, it is easy for the folks who don't run a company to see the day to day effects of our taxation policy. How we tax matters. Second, if I ever want to run a small business, boy I need an education. Third, I'd be interested in Egg Farmer's take, do you think that services you get in MN (better infrastructure, better schools, etc) and the closer proximity to large population centers outweigh the higher taxes? Life is full of trade offs (no matter what Congress says), so is this a worthwhile trade off?

1 comment:

  1. After reading an article in my favorite weekly, the Economist, a thought came to me. The article stated, "in an ideal world the tax burden would be gradually shifted from income to consumption..." Thinking about the statement, it occurred to me that in America we love choices. With a tax system that is based on income, there is no choice, unless you choose not to collect an income. However, consumption based tax does allow the individual the ability to make a choice to pay the taxes or not. If I want to purchase that new cool ipad and give a little to the government, then I will pony up my hard earned dollars to purchase the item with the sales tax included. Why not shift our federal tax burden to the "choice tax system". Looking simply at the tax revenue side of our current budget problems let's move to reduce income taxes and especially income tax deductions and increase, what I call the "choice tax". By keeping a progressive income tax system, however, a reduced income tax rate and creating the "optional" tax system, you can maintain tax revenue to pay down debt. The Economist spoke of an ideal world of straight consumption tax, for me the perfect world is to see progress right now. To get the ball rolling the first step I would do is decrease income tax and rephrase or spin however politically convenient an increase in the "optional tax"

    As a side note, working with hard working families that earn low wages, the biggest complaint I hear when handing out payroll checks is how much taxes are taken out. To see the reduction and any reduction after hard work is very defeating.