[humanrebar]

Do you care to address the interesting part of what I linked?

  A gross receipts tax is similar to a sales tax, but it
  is levied on the seller of goods or service consumers.

...I'm thinking this is a distinction without a difference, which is really my point. They're both transaction taxes. And a fair gross income tax rate would probably be set lower than a fair tax on profits since the amount of taxes paid per business should probably be roughly the same, at least on average.

Will some low-profit and no-profit businesses have problems? Sure, but I'm not sure why they shouldn't have to contribute to the general fund just like all the other businesses. If their business models aren't sustainable while paying taxes, I'm not sure why I should be upset. What we have now is overly complex (deducting losses from previous years) and amounts to a subsidy for losing money.

[tptacek]

He did address the gross receipts tax. There's an immense difference between a sales tax and a gross receipts tax: sales taxes happen at final sale, and gross receipts taxes apply to every transaction.

The gross receipt tax distorts the economy: it rewards firms that integrate every step of their production rather than focusing on their comparative advantage. The railroad that owns its own steel mill is tax-advantaged over the one that buys steel. That policy is inefficient: the economy should reward the most competitive steel mill, rather than insuring that the largest consumers of steel are more or less required to operate their own crappy mills.

Here's a more immediate example: imagine a tax policy that essentially fined Dropbox for not owning its own chip fab, and forced it to compete with huge companies like Apple that did.

Wal-Mart versus Apple is a bad example, because the two companies are in radically different lines of business. Instead, imagine a tax policy that fined Whole Foods, which sources the goods it sells from a variety of different vendors, while rewarding Safeway. And, of course, the point Rayiner was making was that turnover taxes penalize all of direct-to-consumer-retail; it doesn't just pick Target instead of Wal-Mart, but rather penalizes companies that rely on logistics and distribution at all.

[rayiner]

I'll address this point since it hasn't been:

> What we have now is overly complex (deducting losses from previous years) and amounts to a subsidy for losing money.

Say company A makes $10m in year 1, loses $10m in year 2, and makes $20m in year 3. Net gain in wealth = $20m. Say company 2 makes $10m in years 1 and 2, and breaks even in year 3. Also has a net gain of $20m.

Say the tax rate is 20%. In any sane tax system, both companies will pay $4m in taxes over three years. So how do you handle the loss for company 1? Does the IRS write them a check in year 2 for $2m? If not, company A pays $6m in taxes over three years, versus $4m for company B.

Loss carry-forwards are not a "subsidy for losing money." They're a mechanism for getting the right answer integrating a continuous function at discrete intervals, without allowing for negative tax due. Your solution to the complexity is to just punt and give the wrong answer.

[harryh]

When you're talking about "low-profit" businesses you're talking about every single retail establishment from Amazon to Walmart to your neighborhood hardware store to every single restaurant you've ever been to.

I think you'd be pretty upset if all of those businesses closed their doors due to a massive tax increase.