In fact, many of the “waste” expenses have a positive ROI. If you have a very mobile workforce, cars and blackberries make your employees much more productive.

In my company (very large Fortune 500) I see a lot of situations where a refusal to spend money results in lower productivity – such as laptops vs. desktops a few years ago – saving a couple hundred bucks over 3 years, but crippling the productivity of people with the desktops. A couple of bad weather days makes up the difference (since the folks with laptops are expected to be 100% productive from home in a blizzard)

Attack the waste; sure. Buy don’t throw out the baby with the bath water.
kosmo @ The Casual Observer´s last blog ..I Know That I Can’t Take It No More … It Ain’t No Lie

Companies routinely waste more money that we can imagine. Just look at the earnings reports over the past year at how many of them have had devastating drops in revenue but were able to maintain or even increase profitability. In many cases these cuts were personnel unfortunately, but there was also a lot of cuts on non-personnel expenses.

Honestly, I’m not sure I could get on board with the idea but it is worth considering alternatives. We have to hand it to the Weakonomist for thinking outside the box!
LeanLifeCoach´s last blog ..Combat The Closing Techniques – The Puppy Dog Close

“Why not take it the other way, no longer allow expense deductions for business.”

Well, for many, many companies (actually, for many entire industries):

(revenue * tax_rate) > net profit

If I need to buy a Widget Machine for $1M to produce my $1 widgets, I incur this cost whether or not the tax authority allows me to deduct the expense. I have no choice. No machine = no product.

So if I make 1.1M widgets @ $1 each (assuming no labor costs, material costs, etc) I end up with $100,000 in my pocket. At which point the government taxes me on the whole 1.1M.

Deductibility of business expenses allows business to be on even footing with each other. Manufacturing, for example, had a considerably higher expense ratio than consulting.

Cost accounting is actually a rather fascinating topic

Weaknomist said:
“If the value of property they own goes down, deduction. ”

Depreciation is really not that great of a deal for businesses. Given the choice of how to write off the expenditure of the 1M widget machine, it would be far better to be able to write off the entire expense in year 1 than pro-rate the cost over a number of years. Some people seem to think that companies are recovering 2X the cost of the item, which is not true.
Kosmo @ The Casual Observer´s last blog ..Technology Ruins The Olympics

I guess you could say that a corporations or businesses sole reason for existing is to be in business, therefore everything they do is business related. Whereas with individual citizens usually only expenses directly related to earning your taxable income are tax deductible.

I’m going to think about what you discussed further.

Evan, this isn’t a back-ended way of getting to a flat tax. However it is a lot like the fair tax. Good thoughts.

It is the kind of intriguing concept that is just outside the box far enough that it makes one stop and think.

Considering there are so many people that want to carry a big mortgage for the tax break I imagine you are right, it would encourage more spending to avoid taxes. This is what makes me nervous. Our country is already financially frail as it is because of overspending and lack of savings on the part of the consumer.

Why not take it the other way, no longer allow expense deductions for business. They will then be encouraged to be more frugal which will make them more stable. Our economy will slow from where it is and it will be a painful adjustment but at least then it would be stable and sustainable going forward.

As for the additional taxes that will have to be paid, there could be an adjustment in the rate.

Eventually all taxes are paid by the consumer either directly or indirectly through the pockets of corporate America. What should really grind your gears is the out of control federal and state spending! That is the root cause.
LeanLifeCoach´s last blog ..What Is Your Learning Style?