Thread: The Public Tax. Fair. Simple. 60 seconds or less per company

The public tax is a single tax proposed as an option to today's taxation. All it is the product of two variables that are recognized by accountants:

A) General Selling and Administrative costs
B) Operating Margin

The Operating Margin is rationalized as being the result of Operating Expenses. As such, the portion of the Operating Margin corresponding to General Selling and Administrative activities (e.g. management, employees, customers, public relations) is considered to be eligible as a source of public revenue. All other costs are deemed to be associated with private industry expenses (e.g. cost of goods sold and purchases of non-living factors of production such as land or capital). As such, costs other than General Selling and Administrative will not be considered as a source of public revenue. Under the public tax, Operating Margin is synonymous with "ability to pay" and General Selling and Administrative costs are synonymous with amount owed to the public.

Originally Posted by kmarinas86

The public tax is a single tax proposed as an option to today's taxation. All it is the product of two variables that are recognized by accountants:

A) General Selling and Administrative costs
B) Operating Margin

The Operating Margin is rationalized as being the result of Operating Expenses. As such, the portion of the Operating Margin corresponding to General Selling and Administrative activities (e.g. management, employees, customers, public relations) is considered to be eligible as a source of public revenue. All other costs are deemed to be associated with private industry expenses (e.g. cost of goods sold and purchases of non-living factors of production such as land or capital). As such, costs other than General Selling and Administrative will not be considered as a source of public revenue. Under the public tax, Operating Margin is synonymous with "ability to pay" and General Selling and Administrative costs are synonymous with amount owed to the public.

This simple formula can substitute all current taxation as well as all tax credits, loopholes, and personal exemptions, and yet satisfy all the desires that these prior instruments have tried to address.

Ways to reduce public taxes

For business conservatives: One can reduce taxes by reducing General Selling and Administrative costs. This not only lowers taxes, but also looks good for your investors.
For social liberals: One can limit operations to a non-profit status, eliminating taxes entirely, which is equivalent to government subsidy.

External causes that can reduce your public taxes

For business conservatives: A foreign social dictator raises some of the prices for products that your suppliers buy, and you have no other choice but to bear this cost passed onto you. While this will have the effect of limiting your operating margin, it will result in reduced taxes to the effect that the government has helped you without it knowing anything whatsoever of the situation.
For social liberals: A natural disaster causes havoc upon the city, resulting in job losses and reduced profitability. Both operating margin and general selling and administrative activity have taken a beating, and the government lowers taxes without further ado.

Originally Posted by kmarinas86

This simple formula can substitute all current taxation as well as all tax credits, loopholes, and personal exemptions, and yet satisfy all the desires that these prior instruments have tried to address.

Ways to reduce public taxes

For business conservatives: One can reduce taxes by reducing General Selling and Administrative costs. This not only lowers taxes, but also looks good for your investors.
For social liberals: One can limit operations to a non-profit status, eliminating taxes entirely, which is equivalent to government subsidy.

External causes that can reduce your public taxes

For business conservatives: A foreign social dictator raises some of the prices for products that your suppliers buy, and you have no other choice but to bear this cost passed onto you. While this will have the effect of limiting your operating margin, it will result in reduced taxes to the effect that the government has helped you without it knowing anything whatsoever of the situation.
For social liberals: A natural disaster causes havoc upon the city, resulting in job losses and reduced profitability. Both operating margin and general selling and administrative activity have taken a beating, and the government lowers taxes without further ado.

If not too complicated to do so, the tax can be made border adjustable by deducting a percentage of tax liability equal to the percent of business sales which are exports.

Keep trying. Some companies have high operating margins because they have high fixed costs. Operating margin has nothing to do with ability to pay. Net profit does.

Is this like copy/paste from an economics book time?

Originally Posted by Howe Itis

Keep trying.

Thanks.

Some companies have high operating margins because they have high fixed costs.

You mean that their costs are primarily fixed, and their variable costs are almost nothing, and that they can expand their revenue with very little variable costs. This includes financials and medication. Variable costs often involve more elastic supply/demand for goods and services then fixed costs. Walmart's toilet paper, Goldfish crackers in Kroger, and Peanut Butter in Target can be sold as fast or as slow as demand wishes (though food in general is inelastic). People who are paid high incomes often work in jobs that are primarily fixed costs, working behind the retail scene. People who get paid crap usually offer goods whose cost is primarily variable to the array of goods sold during the season.

There is some correlation between operating margin and profit margin, since profit margin is usually lower than operating margin. I chose operating margin instead of profit margin:
1) It's higher, so it's more likely to bring about enough revenue.
2) It's a figure less fudged by corporate tax, so it removes an uncertainty.
3) A direct tax on net profits is a direct tax on shareholders.
4) A tax on operating margin is primarily a tax that favors businesses with high variable costs, which I think would improve the progressivity of tax.

Operating margin has nothing to do with ability to pay. Net profit does.

We are just stating our feelings about ability to pay, thinking that some term could, or should, apply to it. Economyprofessor.com thinks ability-to-pay is neither net profit or operating margin.

Textbook time!

Ability-to-Pay Principle

Ability-to-pay principle envisages that taxation should be levied according to an individual's ability to pay; that is, individuals with higher incomes should be charged higher taxes.

Furthermore,

Individuals with higher incomes are charged more taxes not because they use more government goods and services but because they have the ability to pay more. The primary indicator of ability to pay is commonly agreed to be income. Ability-to-pay principle is therefore in contrast with the benefit approach principle, which determines the amount of taxes a person should pay by the benefits received in public services. Ability-to-pay principle is based not on the benefits received but on the notion of equal sacrifice. It is considered to be characteristic of a socialist sentiment, and is used in most industrialized economies; but equality of sacrifice, is open to interpretation as it can be easured in absolute, proportional or marginal terms.