[cure]

> Individual people's income taxes cannot be treated this way, because the closest analogy to "business expenses" for a person's lifestyle is their cost of living. If cost of living were deductible it would be highly gameable and ripe for abuse by numerous parties.

You are being a little bit funny here. This paragraph basically proves the OP's point.

Because companies would never abuse the taxation rules, of course. They would never cheat by shifting money around in opaque ways so as to lower the profits they have to report for taxation purposes. Clearly, that's why they can be trusted to be taxed on profits rather than revenue, but mere mortals cannot.

/sarcasm

I think in your gas station example, the net effect of a 4% tax on revenue would naturally be a 4% increase in the sales price of goods. Or, the gas station would go out of business...

I actually don't think a flat revenue tax would necessarily overall be better than the current system where taxes are based solely on profits, precisely because of examples like the one you give. It seems like some sort of combined model of a revenue tax and profit tax may be the way to go. Which is incidentally where the EU was going with this particular proposal.

[CompelTechnic]

Your argument advocating that the gas station increase its prices 4% does not fully consider the fact that businesses are risky, and it does not consider how unfair the situation remains for the owner. If this 4% increase did occur, the new revenue figure is $1,092,000. With $92,000 of profit before tax, the owner is now paying $43,680 of taxes, leaving $48,320 of profit after tax (much better than before). They are still paying 47% taxes on their profit before tax.

The degree to which businesses generate expenses is the majority of the degree to which they take on risk. It's pretty well understood that most economies are already too risk-averse. We should not further punish those willing to take risk.

The thrust of my argument is focused around the fact that low margin businesses would have an EXTREMELY high sensitivity to variable cash flows. I should have focused more on how unfair this is to small businesses, which already are a risky proposition. It is strange to me that multiple people have replied without having any acknowledgement of this.

The benefits of taxation must be balanced against the potential for abuse and the damage it does to the businesses that are taxed.

Taxing revenue would likely have less potential for abuse, but I would argue the damage it would do to the economy would be much larger than the benefit this may provide.