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Comment on Why do big corporations get to claim losses, but small businesses can't?

Profitability is just a proxy for whether someone is legitimately running a business, or just trying to save money on their hobby. Businesses can deduct expenses, hobbies cannot.

So if you are running an etsy store or an engineering company and buy a 3d printer to make parts, the cost of that 3d printer is subtracted from revenue for tax purposes. If your “business” is actually a hobby, it’s not legally a business expense and therefore it’s not deductible

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snooggums@midwest.social ⁨2⁩ ⁨months⁩ ago
This is a great explanation for why business deductions are stupid in the first place. Why does being profitable justify being even more profitable by paying fewer taxes?

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- FireTower@lemmy.world ⁨2⁩ ⁨months⁩ ago
  
  Why does being profitable justify being even more profitable by paying fewer taxes?
  
  It’s not about encouraging profitability (that only one proof of a real company) as much as allow businesses to grow, without people faking businesses to write off personal expenses. Properly reporting expenses can allow new or growing businesses to reinvest in themselves. I agree that there should be a different structure for large business but I’ll give a hypothetical to outline why it’s important for small businesses.
  
  Let’s say a new family owned machineshop does $200k in sales in its second year. Pre-tax after all other expenses the business has netted $50k. Post tax (-$40k) they’ve got $10k left to reinvest. They want to buy $20k worth of machinery to grow the business. If they can deduct $20k for the machinery from the $40k in taxes the can buy it. If not they can’t.
  
  Meanwhile the large international conglomerate machineshop down the road makes $400k a year post tax. If the want $20k in new machines they just buy them. This isn’t because they run a better business w/ better margins or product but because they have more volume.
  
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- Buttflapper@lemmy.world ⁨2⁩ ⁨months⁩ ago
  
  This is a great explanation for why business deductions are stupid in the first place. Why does being profitable justify being even more profitable by paying fewer taxes?
  
  Winner takes all, I guess? Amazon has been so successful they became a literal monopoly (don’t care to argue semantics of it, this is my opinion), and employs hundreds of thousands of people. They’re so successful that the impact of causing them to pay their fair share might impact the economy in a larger sense. So they just let them have way more freedoms than small businesses?
  
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