The only way to prevent this is to move to a sales tax model. Anything else can be gamed ad nauseum as GE & co have so helpfully proved. With today's tax system, the amount of taxes you pay are inversely proportional to the amount of complexity you're willing to deal with.
And since corporations are legally people, you're barking up the wrong tree with conversations about not taxing businesses. Sales tax it, period. Cannot be circumvented.
That is not the experience of many nations which have sales taxes, for example, the United States. Among many favored ways to circumvent it are underreporting, effecting the transaction in a jurisdiction which has a favorable sales tax (New York every so often prosecutes people for the crime of buying art in Connecticut), classifying the sale as something which has favorable tax treatment, etc etc. I've heard hilarious accounts of merchandising decisions by which a handbag was only sold in combination with a scarf such that the transaction became clothing + accessory (taxed at LOW%) rather than luxury goods (taxed at HIGH%), despite neither the buyer nor seller benefiting from the bundling of the scarf.
classifying the sale as something which has favorable tax treatment
The UK, with a VAT/sales tax rate of about 15% has similar cases. A popular biscuit (Jaffa Cakes) are legally classed as a cake (and hence have lower VAT rate), as opposed to a biscuit that have higher VAT rates. cf. http://en.wikipedia.org/wiki/Jaffa_Cakes
Many people oppose ideas like this because it is less progressive (w.r.t. income) than an income tax, and they hold an apriori belief that taxation should be proportional to income. This is because consumption rises sublinearly with income, and people at the bottom actually tend to consume more than they earn. In mathematical terms, dConsumption/dIncome < 1.
In practical terms, this means that most of Steve Job's wealth is not stuff he can consume, but rather productive capacity that he directs.
In fact, many people at the bottom of the income scales actually consume considerably more than they earn, so a sales tax would be a big tax hike for them.
Raw data: ftp://ftp.bls.gov/pub/special.requests/ce/standard/2009/income.txt
Sales tax only puts the burden disproportionally on the poor.
If you're making millions of dollars a year you're probably only spending a small fraction of it and if there's only sales tax you pay tax on a percentage of what you spent. So let's say you made 30 million dollars and spent 8 and say the sales tax rate is 15%. In this case you paid 1.2MM in tax for a marginal tax rate of 4%.
On the other hand if your income is 15k you're probably spending it all or very close. In which case your marginal tax rate is 15%.
Not all that fair I'd say.
Personally I like the progressive income tax method. I just think capital gains should be taxed as income rather than at a flat 13% and no special rules for corporations either. If they want to be people they can be taxed like people. If they want to be different then we can just get rid of corporate personhood. I doubt they'd like that much.
If they want to be different then we can just get rid of corporate personhood.
Ok, lets do that. A group of people working in a building with the word "GE" on it just violated a contract with you. Who do you sue?
With corporate personhood, you sue the legal person GE. Your responsibility ends here - it's up to parties within the entity GE to figure out who goes to court, and the court can seize any GE assets if GE refuses to pay (assuming you win).
That's all corporate personhood is - a convenient legal interface. I'm not sure why you believe having this particular interface necessitates double taxation of income earned by corporate owners. Could you explain?
GP is talking specifically about the recent ruling that corporations have e.g. freedom of speech, and can therefore send lots of money to fund political campaigns. It basically gives corporations a huge amount of political power.
As far as I'm aware, no such ruling ever occurred. Corporations are currently barred from funding federal political campaigns. They also have no free speech rights that your (non-person) printing press or cell phone lack.
(Before you cite Citizens United vs FEC, please go read what it actually says.
In short, the decision is about the free speech rights of the human owners of a corporation. http://www.law.cornell.edu/supct/html/08-205.ZO.html )
You can actually fix a lot of the sales tax issues by excluding certain categories (e.g. unprepared food, clothing).
I am more a flat rate tax person with a base exclusion per tax payer (i.e. your kid working a summer job files for themselves) and only one tax line (the government can divide it between SS, FICA, etc). As a curiosity, I was trying to figure out what would actually be revenue neutral. I think somewhere in $20K deducible then 17 - 20% flat rate after that. It is really not that easy to get all the information needed to play with various scenarios.
You can actually fix a lot of the sales tax issues by excluding certain categories (e.g. unprepared food, clothing).
That's what my state historically has done. The last time I bought an expensive business suit, the purchase was free of sales tax, because a business suit is clothing. There is always pressure, however, to broaden the categories of goods and services that are subject to sales tax, especially when a government unit has a shortage of revenue relative to what it is expending to maintain government programs.
Creeping sales taxes is a problem and pretty much why I think Cain's 9-9-9 plan is not a good idea. I would prefer to leave sales tax to the states and have the federal do other.
There are always court cases about silly things; you don't need taxes for that. Five years ago, a Massachusetts judge ruled in a commercial leasing lawsuit that a burrito is not a sandwich: http://www.democraticunderground.com/discuss/duboard.php?az=...
No doubt it gets to be a little weird, but unprepared is a pretty well defined thing if you don't do what the federal food stamp program in the US does and type of food shouldn't really matter. If it requires cooking or is primarily an ingrediant then no tax.
US weird stuff: If you buy a frozen burrito it is ok. Unless the store has a microwave and you use it, then it is not ok. If you go home and microwave it then it is ok.
I don't have to define it, it is in the law books in several states - even the fed food stamp program has its own version which I mentioned is problematic.
milk and fruits are often considered ingredients in these laws - chocolate is too, chips are often taxed. stuff gets complicated depending on who wrote the law.
what's with the down votes - I didn't write the damn laws like this
1. Don't tax the essentials. Milk, fruits, vegetables, lean meats, non-luxury cloths. Don't tax the first $50 of a pair of shoes. Don't tax the first $15k of a car.
2. Determine the average monthly sales tax paid for by a person at the poverty line. Have the government send a monthly check for that amount, minus 10%, to every citizen. Everyone should pay some tax.
If you have a more expensive house, you are paying a much higher tax rate and not actually getting much more out of the money you are putting into the system.
If their kids are in private schools, they are also paying double or triple what the average person is paying, yet not actually using it.
There are also many taxes wealthy people pay for but never actually use.
so it's fair. Also, whatever happened to "paying your fair share"? This phrase seems to be going around a lot, yet it only seems to involve people at a certain income level.
Amusing, given that you're repeating deceitful rhetoric designed to be hostile to anyone except those already making a fairly fantastical amount of money. (The drive to defend those who are screwing the one repeating said rhetoric is common, though I still don't understand it.)
Paying for services you don't consume as a reason to consider one's tax burden "higher than it should be" is a meaningless red herring. I don't have kids at all, yet I pay for schools--I'm paying NaN% more for no value! Holy shit, that's a lot of % (or is it? I can't evaluate it). I don't use public transporation, but I'm paying for it. I am not rich, but I also don't use these services. You do not, however, see me complaining about it, and I do not attempt to handwave that into some claim that I am paying higher taxes than I "should be." (As it happens, I should be taxed higher. I would vote in favor of someone who wanted to tax me higher, should those in higher brackets be appropriately taxed as well. This will never happen, because screwing the middle class is the name of the game.)
Your implication that "the 1%" are in fact paying anything remotely close to an equitable sum is made so is left at best curious by the staggering wealth gap that simply continues to grow at an unsustainable pace within this country. If "the 1%" paid their fair share, that would not be happening. Yet it is. Res ipsa loquitur.
Yes, it can be circunvented, here in Uruguay and neighbouring countries we've had sales tax for decades, and there are more than enough loopholes to circumvent it.
Heck, even local governments evade sales tax (spanish link saying that the governor of Misiones teaches how to evade sales tax):
The complexity is because the government uses the tax system to motivate behavior. There isn't a mortgage tax deduction just for the heck of it, it is there to encourage people to own houses. There are long term and short term capital gains because the government is encouraging people to hold investments for a longer time.
Any "simple" tax gives up these governmental incentives.
And since corporations are legally people, you're barking up the wrong tree with conversations about not taxing businesses. Sales tax it, period. Cannot be circumvented.