A friend of mine from a farming family in Europe once told me a story that his family would wait until the year one of his siblings was due to go to college and then invest in new farm machinery. Their reported net income for the year would reduce or go negative and the sibling would get to college effectively for free on a hardship tuition grant.
So, what happens if you work in an area where the cost are high but the margin is low? You might make $100K but have $85K in costs. You still have $15K in income. Does this apply to those self employed or only wage earners (gets a paycheck)?
Huh? Wouldn't they have to depreciate it over several years so only a fraction of it would be a deduction in the current? Or is the idea that they'd buy so much capital equipment that even the fraction they could depreciate that year would wipe out all the other income?
AIUI, the concept of depreciation exists in tax law precisely to prevent indefinitely deferring taxes via reinvestment (though it can't do anything about the portion of reinvestment going to pay salaries a la Amazon):
> Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.
FWIW that's from an American setting, whereas the story above was from Europe. I agree with the principle myself, but as a citation it's barely relevant.
What we need to do is construct systems that are robust against this kind of gaming and don't reward the gamers as heavily as ours does.
The wealthiest people and companies on the planet pay a pittance of taxes, if any at all. We lavish those who totally ignore the spirit of the law all the time.
From what I hear, most of us don't follow either the letter or the spirit. A former project manager of mine had previously worked as a cop, and I asked him how he determined who to arrest — if I remember right (it was a while ago now), the answer was approximately "if they look sus, arrest first and figure out the exact offence later". What's the quote? Something along the lines of "as a kid I thought adults had it all figured out, then I became an adult and realised none of us know anything and we're all bluffing all the time"?
The reason we're not all in jail all the time is that we don't fully enforce almost any law, IMO because we all like to think of ourselves and most of our peers as the "goodies" even as we demand ever stronger crackdowns on ever broader ranges of behaviour. And also we don't like living in police states run by people who tell us we're actually all bastards.
Fully enforce road laws? The only people who won't lose their licences, will be people who aren't driving.
Littering? The fines would probably raise enough money to replace all taxation and then some.
Drug laws? In the UK, heroin users alone are a group nearly three times the size of the prison population, all class-A drugs combined are about 11x the UK prison population, all drugs of all categories are about 31x the prison population — and that's "this year" not "lifetime use" which matters given the length of the prison sentences for different categories: https://www.ons.gov.uk/peoplepopulationandcommunity/crimeand...
Copyright infringement? Imagine if Google (or AltaVista) had been hit by the same sort of lawsuits sent against individuals engaged in P2P file sharing during the Wild West era of the internet.
Personal data protection? Even before GDPR, websites should've been asking for permission for tracking cookies.
This is following the rules and using the system the way it was designed. This doesn't even violate (probably) the intent of the law - it just violates the desired outcome of some parties involved.
