Electronics engineer talks corporate taxes

Mr Wozniak, who said he originally helped set up Apple to \”empower the little guy\”, said it was \”really not fair\” that companies are not treated the same as people by tax authorities.

\”People are not taxed on profit; they are taxed on income,\” he said. \”Corporations should be taxed the same as people, in my mind that is how it should be, that would make things fair and right.

\”That means corporations pay taxes on all of their revenues or people only pay it on a tiny amount called profit and until we rectify that, the whole problem is just with us forever.

\”That is why the rich get richer and the poor get poorer and I am always for the individual being much more important than their training; same reason I created the Apple computer at the start, it was to empower the little guy.

\”Why do businessmen get to write off lunches and cars? If normal people did they would have more savings.

\”That is really not fair, that businesses are not treated the same as people.

\”A person would say, \’my life is my business and I have to pay for my home, pay for my clothes, my food and what is left over if I make a little money some year and put it in savings, that is my profit\’, but people are not taxed on profit, they are taxed on income.\”

Not really going to work, is it?

A low margin company (say, a retailer) would be wiped out by an income tax, while a high margin one (oooh, say, Apple) wouldn\’t give a toss.

21 thoughts on “Electronics engineer talks corporate taxes”

  1. Mr Wozniak is wrong.

    People are taxed on profits.

    I think what he means is that employees are taxed on income. Businesses are taxed on profits.

    And employees can deduct a lot of expenses related to their job anyway. It is simply that they do not incur them.

    Employees don’t have to buy the desk they sit at and pay rent for the use of the office it is sat in.

  2. “I created the Apple computer to help the little guy””
    Yeah, sure you did. You haven’t given all the mobey you made from it help the little guy have you!
    Your headline should read “lying mega-rich bastard spouts self-serving cant”
    And is Apple really still tring to play the Outsider? Still claiming affinity with the little guy?
    Wanker.

  3. Or, individuals are taxed on income less allowances and allowable expenses; businesses are taxed on income less allowances and allowable expenses.

  4. So Much For Subtlety

    A low margin company (say, a retailer) would be wiped out by an income tax, while a high margin one (oooh, say, Apple) wouldn-t give a toss.

    I have been roundly criticised here before for saying companies should be taxed on their turn over, not their profits.

    If you turn and squint at it just right, it is not a bad thing that a low-margin retailer falls over. While it is definitely a good thing that a high margin producer like Apple thrives. One is the old dying economy, one is the new emerging economy. The shops will be replaced by fewer by higher margin stores. Tough for customers but then they can shop on-line. Apple will have even more money to expand even faster.

    Where is the downside?

  5. At least Wozniak exposes the legal fiction that “corporations are people” which has been batted about this site with maximum obfuscation when it comes to taxing the Plastic Man multinational.

  6. For the low margin buisiness the income tax would become one of the expenses, and appear in the final price of the goods as they are selling near to the cost of production. For the high margin one , Apple it would effect them more because they have a higher ratio of turnover to expenses.

  7. @SMFS:

    If you turn that argument round, what you find is that companies will have to make high margins if they are to survive. So high-volume, low-margin businesses will have to become high-volume, high-margin businesses. If we assume costs are flat, income will have to increase substanially: which means prices will rise for all the stuff which is currently quite cheap, like food. Costs staying flat is of course quite improbable, as the company’s suppliers will be in the same position and so as their prices rise the company’s selling price will have to increase again.

    Essentially, it would be a VAT without input tax recovery: a large chunk of grit thrown in the wheels of commerce every time a new entity gets involved in the supply chain. Whilst shortening supply chains might be nice in some ways, it would make life inordinately difficult.

    Anyway, one could redesign commercial systems to get round it: instead of the supplier selling to the wholesaler selling to the retailer selling to the customer, you’d probably end up with lots of people acting as agents. So the supplier sells to the customer, but the wholesaler and retailer just act as commision-based agents and only get taxed on their commission. Which would effectively get you back to the same amounts being taxed as you have now, but with a horribly convoluted legal situation.

  8. @ ifabloke:

    That’s what we have now, the thing is that employees tend to have very few expenses and so their income and profit are broadly similar.

    What people tend to miss is that it’s not a split between companies and individuals, it’s a split between businesses (who might be companies or individuals) and employees (who are only individuals). Sole traders and partnerships have a lot of expenses, just like companies do.

    Anyway, Wozniak should move to the UK if he doesn’t think businesses shuold be able to write off cars and lunch for tax purposes. Certainly lunches aren’t usually deductible, and the tax on cars is getting more and more penal.

  9. @DBC Reed: show me where I can stub my toe on a corporation, and then I’ll consider whether corporations are anything other than a legal fiction fronting a group of people.

  10. So, if we were to look at Steve’s IRS statement we would find that he hasn’t claimed any business expenses at all?

    Steve Wozniak will have paid 30% of all income he received in the financial year. No expenses, nooffsets, no excuses, no allowances nothing.

    I’m sure he’ll be only too delighted to back up his powerful words by confirming this information.

  11. @SMFS: ‘If you turn and squint at it just right, it is not a bad thing that a low-margin retailer falls over.’

    That’s Amazon dead then. It’s business model is based on being low margin.

    Actually, taxing revenue will probably be their next tactic for shutting evil Amazon down and getting us back to the grand old days of getting rained on, shat on by birds, mugged and raped on our way down to the shops.

  12. Oxonymous, Amazon’s business model isn’t just low margin, it’s actually low profit. Very tricky for anyone to get tax revenue from that other than on revenue.

  13. @SMFS: If you turn and squint at it just right, it is not a bad thing that a low-margin retailer falls over.

    I can see how your thought process took you there, but in real life it’s a bit bollocks.

    Most low margin businesses are low margin businesses because they are in competitive markets where what they do can be replicated by others if they try and make high margins.

    Tesco makes low margins.. not because it’s a bad business that we’d like to see ‘fall over’. but because it’s a good business which is kept ‘honest’ by a heap of other good businesses.

    Taxing turnover of supermarkets would not mean we get better supermarkets, it would mean we get the same supermarkets but with more expensive stuff in them.

    Maybe that’s not wholly a bad thing. It means tax incidence is very clear. The consumer pays, and as the consumer is least able to avoid a tax (unlike the corporate and, albeit to a lesser extent, the shareholder) so that solves a lot of problems.

    Downsides, however, include the potential of the tax to accumulate through a supply chain as each supplier passes it on, but without the relief for inputs that VAT gives. Unless you would give that relief.. in which case we’re just talking about scrapping CT and increasing VAT. Good luck popping that one up the flaghole.

  14. In the low margin case the tax falls on the consumer, in the high margin low competition case with monopoly profits it falls on the business

  15. Woz may be interested in this little computer I’m knocking up in the shed. Bored with accountancy and tax, I’ve decided to become an engineer.

    I say little, but in fact it is a bit bigger than the shed, as some of the wires are sticking out a bit.

    I’m also considering joining Apple as a research fellow and I wonder if Mr Woz could give me a recommendation?

  16. @smfs

    My partner has a low margin business: a factory and two shops making and selling cake. Why don’t you try this over the internet? Fresh cream and fresh fruit after a couple of days cooking in the back of a courier’s van. The concept of making and selling fresh products is sooooooo yesterday.

  17. I was similarly dismissive on Twitter when I saw this. Woz is/was a great hardware hacker, but I’m not sure economics is his strong suit. And I say that as a computer guy who considers himself a strictly amateur economist.

    If we’re to “tax corporations like people”, then what would their personal allowance be? Would we give them tax credits if their income was below an arbitrary level? Would we give them “child benefit” if they have a large number of employees (each with actual real starving children) to support?

  18. A tax on company income? what, like VAT, say….? It would be passed straight on to the consumer.

  19. Whenever DBC Reed stoops to opine on these posts, it is useful to remind yourself that his preferred model is one of wholesaler-capture – he wants to return to the days of resale price maintenance where retailers were not allowed to discount goods – and small companies and sole traders were crowded out . Why he wants to maximise the amount of money that ends up in the hands of corporations is anyone’s guess. There is probably an element of – if the corporates end up with money then more of it will end up in the hands of wage-earners. A more pragmatic viewpoint would suggest that intermediary margins should be slashed to the bone to allow consumers to put their money where they want it to go – whilst bearing in mind that most consumers are also employees.

  20. Back at you Tim:

    A low margin company (say, a family that spends a lot on low return consumption goods) would be wiped out by an income tax, while a high margin one (oooh, say, the Obamas, whose spending on ghost writing pays a high return) wouldn’t give a toss.

    I think there are problems with either a total income/revenue tax or a net income/profit tax. But having households face the former while corporations face the latter encourages the former to save and invest, and the latter to be profligate with expenses. I think, at a minimum, we’d be happier if we reversed those … and probably better off if shifted firms to the same form of taxation as households (and then limited double taxation).

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