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Comment by cryptoz | Hacker News Reader

Corporations should be taxed on revenue, not profit.

Restaurants and other low margin businesses would cease to exist under this plan.

That’s a common misunderstanding, restaurants are low margin due to competition. As long as the industry moves in lockstep with cost increases the margins stay the same.

Sales taxes for example vary widely yet have minimal impact on low margin business. Lower them and customers save money but restaurants margins stay the same.

For the same reason though, complementary goods don't necessarily have the same tax burden or margins. So the distribution of purchases might shift. Restaurant-goers might just eat at home more, or maybe even just go out to more expensive places that can operate with lower margins.

The important bit is the number of restaurants may change, but their margins don’t. The classic Starbucks at all four corners of an intersection is predicted on the total number of customers in that area. Cut them by 25% and 1 of those 4 locations but close 1 location and the the three remaining have identical numbers of customers as before the change. Cut by 75% and your down to one location, but again it ends up seeing the same number of customers before and after the transition.

So what you're saying is this tax is effectively going to be paid by the consumers?

Why? If it were applied across the board, then every business would just treat it like any other business expense and price accordingly. On a theoretical zero-margin business it would translate dollar-for-dollar right to the customer, yes?

The problem is that you're incentivizing the creation of vertical monopolies. A small restaurant is forced to rely on suppliers who would pass the revenue tax onto the restaurant. Meanwhile, McDonald's can afford to buy their own suppliers. McDonald's suppliers would technically not make any revenue, so they get to pay less in tax.

that’s a big oversimplification

Of all the arguments to be made about corporate taxation, this one makes the absolute least sense.

Taxing revenue does shut off many tax loopholes. Accounting can play lots of games with profit/loss, but revenue is much harder to obfuscate.

However this basically just seems like a Sales Tax to me, which we already have in most countries.

And would kill a lot of low margin businesses right?

Right, it is crazy to treat the revenue of 2% margin grocery stores the same as 50% margin SaaS products. I don't know what kind of economy these people are trying to build.

Which is why this thinking morphs from sales-tax to VAT, so it captures the revenue across the supply-chain.

I would say that most of the problems with wealthy people not paying their "fair" share (what ever that might be) is the fact that people are taxed on income and corporations are taxed on profit. Many wealthy people do what they want to do with companies (taxed only on profits) or non-profits (not taxed at all!), while the average Joe is taxed on their income. It would be a good idea to have both people and companies taxed the same way.

Personally I think it would be good to get rid of income and corporate taxes all together and replace it with a land value tax. So much more freedom, less regulation, and crazy tax loopholes.

Would the land tax work well with, say, tech companies though? To me it seems those take advantage of completely different resources. Internet infrastructure, data, attention, you name it.

The answer seems to be that we should tax capital gains and income at the same level. This would disincentive investment on the margin, but it seems like it might be the better tradeoff. Alternatively you can go the other rough and tax consumption (progressively) which would benefit accumulation.

Why not just consider every person a corporation? If it make 100K and it costs you 90K to run your family (yes there will be special rules) you pay tax on the 10K.

If you make 1M and it costs you 400K to run your family, you pay on the 600K.

If you spend more than you earn, you carry forward the loss.

Land value tax makes sense on paper, but implementation is a huge question. Who decides the price, how often is it revised, how do you make it transparent? Maybe "solve" that issue with a trick: everyone decides their own value and thus their own tax, but whatever value they decide is a an offer to the market: if you think the person is underpricing their land, you can buy it from them at that price.

Most places in the US have had property taxes for centuries, so these implementation problems have already been solved (not always very well, but money is collected). Disentangling the land value from any improvements is a bit tricky, but not much more than determining the value of the total property.

I have thought that valuating your own land could possibly work, but people would have to have a more detached sense of land/home ownership for that to work. People get emotionally attached to where they live, but maybe encouraging people to be less attached would help many current problems in society cause by NIMBY issues.

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