I most certainly cannot deduct housing, food, entertainment, vacations, or large purchases.
> The problem is that we obviously can't let you deduct everything, because if you can deduct everything there would be nothing to tax, aside from savings.
This is the point the parent poster is making. We say that it's ok for corporations to deduct everything, but not the people? Why are we ok with that?
>This is the point the parent poster is making. We say that it's ok for corporations to deduct everything, but not the people? Why are we ok with that?
Because companies, to some approximation, are pass-through entities, so it doesn't make sense to tax them. Most of the stuff you buy are for own use/consumption. Food is an obvious one, but so are movie tickets TV and last year's European vacation. Companies don't do any of that. It doesn't need food, movie tickets, or European vacations. It might buy flight tickets for its employees to go on sales trips or whatever, but it's not for the company itself. Moreover if you're buying stuff for business purposes (eg. you're a contractor and need a flight ticket to go meet your client), you can deduct it too.
More practically, taxing revenue or not allowing companies to deduct expenses would heavily encourage vertical integration. A vertically integrated widget factory will only have to pay such a tax once, but a widget factory that buys its sheet metal from a foundry, which gets its ores from a miner will have to pay the tax 3 times. That's bad for the economy because it discourages specialization and division of labor, which is basically the other pillar of the modern economy.
> Companies don't do any of that. It doesn't need food, movie tickets, or European vacations.
And yet they sure seem to cater a lot of lunches and dinners, pick up the costs for large corporate events, pay for suites at event venues, and fly executives around the world in private jets.
>pay for suites at event venues, and fly executives around the world in private jets.
If it's for legitimate corporate purposes, I don't see the issue, because as a contractor you can do the same deduction. And while I'm sure there's some non-zero amount of improper expensing going on, the amount relative to income taxes paid by the employee makes this a non-issue in practicality. The IRS has better things to worry about than grilling a company on whether some executive's 1 week stay at a $500/night hotel (tax value: $3500) was a proper expense or not, when the executive makes $500k+ TC.
$500.00 a night is $182,500.00 per year. That’s 20% of comp. What “better thing” does the IRS have to do? I don’t disagree with you that the IRS has limited time and resources and should maximize their impact but comparing a nightly expense with annual income doesn’t make that case.
> The problem is that we obviously can't let you deduct everything, because if you can deduct everything there would be nothing to tax, aside from savings.
This is the point the parent poster is making. We say that it's ok for corporations to deduct everything, but not the people? Why are we ok with that?