Quote:
Originally Posted by whell
You also had to pay tax on the capital when you acquired it, whether than capital is money or machine. A business also pays taxes on its human capital.
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Presumably that was included in Pete's $1 cost to manufacture the item. Explain how a firm is required to pay tax acquired capital in the form of money (in the form of a business loan). Actually, the interest on that loan becomes a deductible item, as does the cost of Pete's home office, computer, Internet service, car lease, and annual junket to Miami to visit suppliers. In the end, he can actually show a loss, despite earning $.25 on each item, and write that loss off against his profits from his his or his wife's other income.
Pretty soon he's down to less than 13% effective tax rate.
