Political Memes

You have to think about why it works that way.

A profit from a business is money that is taken out of the business. If the activities of the business generate more money than the business is spending, it doesn't have to become profit. It can also be re-invested in hiring more people, buying more equipment, training their workforce, expanding to new locations, even given as raises or bonuses to their employees. In theory, all of the things other than generating a profit are generally things that are good for the community. Employees can get hired, or trained, or raises. The business can expand allowing more people to buy from them, etc.

A profit is taxed because it's basically what a business does when it doesn't have any other useful ways of spending its money. In that case the excess money is just going to the business owners. The government is basically saying "ok, well if you aren't going to use that money for something that benefits everyone, and are just going to give it to the owners, we'll take our cut now. If the profits go directly to the business owners as income, they're then taxed again as income tax (again, in theory, in practice business owners don't want to pay that as income tax so they'll try to arrange to avoid it).

Income taxes are a different kind of taxation. They're basically a way for the government to own part of your labour. They go back to the time when peasants worked on the land. In exchange for the soldiers protecting them from bandits, the peasants shared some of their harvest. (I realize it was much more coercive than that, but the idealized theory is that taxes were to support the government which protects you or provides you services.)

The obvious problem with "after I've paid all my bills and rent" is that "all my bills and rent" is something that someone could always adjust so they had to pay zero taxes. Even if you just limited it to "my housing expenses, food expenses, water bill, and electrical bill" someone might buy a huge house, or buy only the finest groceries, or install lavish fountains, or run up their electrical bills. So, instead you might want to say that someone only gets taxed after reasonable living expenses are deducted... and that's how things work.

Progressive taxation schemes typically mean that you pay 0 tax on your first X dollars earned per year. X is supposedly set to the minimum of what someone needs to get by. The way it's done on the US is that the lowest tax rate is set at 10%, but the standard deduction is set at $15,750, so the 10% only kicks in once you've passed that. $15,750 is absurdly low. It should really be at least double that, if not triple, but the idea is there. That's the "only after I've paid all my bills and rent" number, if you assume someone is paying the lowest rent possible and their bills are the absolute necessities. But, I don't think anybody could realistically live on their own for $15,750 per year.

So... yeah, Lisa. Things already work like that. It's just that the numbers are all fucked, there are too many loopholes and exceptions.

That's how it works in many countries.

Business pays tax on profits (revenue - expenses). Salary has smaller tax for business compared to pure profits, employees don't pay it because it's not profit. So businesses have incentives to keep human employees instead of keeping all the profits for themselves.

And that applies to all businesses. So if you, for example, bought a carrot for $10, tax is included, you don't pay tax on it.

• The distributor bought it for $6, spent $1, pays tax on their profit ($3),
• farmer grew it, used fertilizer, seeds, labor, etc., pays tax on profit (maybe $2),
• the fertilizer company again pays tax on their profit, and so on

In US you pay tax on every transaction. You get salary, you pay tax, you buy a thing, you pay tax, you eat something, again tax. This makes you more aware government is taking money, compared to the first scenario. But it also gives government ways to make complicated rules and give different tax benefits to different people. In the first scenario, government help goes to everyone whether they have a job or not. In this case you only get Tax cuts if you already make money.

That is basically why the Standard Deduction exists.

I wrote a free spec script for a charity organization, enabling me to write off ~$50k in charitable donations for putting in a few hours of work.

Everyone should be looking for loopholes and ways to prevent the US government from getting their money.

That's kind of what the standard deduction is. Horribly out of date and not on pace with inflation, but still.

My CPA always reminds me, US tax laws are not written for us.

Whats next, removing the inflation targeting that is actively eroding salaries and the minimum wage?

Imagine not having to ask for a raise but your cost of living getting cheaper, cant have that because no one would buy anything and we would all starve to death. Trust in the science told to us by the gods of corporate bailouts.

Homeowners can write off the interest paid towards their mortgage. Renters can't write off shit.

Progressive taxes are kind of supposed to take into account basic necessities and tax you more on estimated expendable income. So if you earn more, you can pay a higher portion of what you earn.

But also, I agree. Especially with cost of living being radically different depending on where you live. House, car, utilities, and grocery should all be deductible.

Makes more sense than it might seem, since when you pay all those bills, that's usually taxable income to the recipient. So if it isn't a write off, taxes can be paid many times on the same item.

Should make myself a business and right off everything as reinvesting in my life.

Where are you from?
I can file a lot of the bills for my flat (e.g. things like repairs and facility service) at the tax office, as well as stuff like child care and most of my car's mileage (or my bike's mileage :-) ), to be exempted from income taxing at least (there are still other taxes).
Rent money would be fully taxed, though, as well as other cost of living like food and clothing.
Country is Germany.

I've tried writing everything off, but it's always been less than the standard deduction.

Businessmen don't get to write off their living expenses either, but feasibly you could start a business and become a contractor for your employer so you could write off things like footwear, home office square footage, and a standard deduction per mil driven between two work locations.

Best part is the ~~(Canadian?) IRS?~~ CRA will never audit you unless they have the staff and they can get more out of you than the cost of the audit (roughly 20k minimum).