At Work

Oh those darn tax loopholes

If you give me $5,000 so that I can start a small company and if successful I will give you your money back with some extra for taking a chance on me, what do you expect?

I’m guessing you expect me to run the business as efficiently as possible, to make money – as much as possible – while not only keeping my interests in mine, but yours as well. I also suspect you want me to do everything legally and to pay as few taxes as possible in the process so that you and I keep as much of the profit as possible.

I don’t think any of that sounds unreasonable do you?

Why then when a large corporation acts that way is it characterized as unfairly using “loopholes” which are in reality only sections of the tax code available for use. Every taxpayer, including you and me uses some form of a loophole to our advantage at the expense of others.

For example, if you get your health insurance through your job, you can pay the premium with pre-tax money thereby reducing your real expense. In addition, the portion your employer pays for your coverage is tax-free income to you… forever🤑 You can even use a tax-free flexible spending account (FSA) to pay your health care bills, even a pair of prescription sunglasses … Loopholes? Those benefits are not available to individuals paying their own way. Student loan interest is deductible, but not your auto loan. Under certain conditions students can deduct tuition and school expenses or take a tax credit … Loopholes?

img_2173-1It’s not corporations or the super wealthy who cheat on their taxes, in fact most of the cheating is done by individuals who deal with cash in their business and simply do not report all their earnings. Do you think small businesses with business use leased cars, cell phones, etc don’t use those things for personal use … contrary to the tax code?

If you are saving for retirement or if you are in a pension plan at work, those funds are invested in companies and it is assumed the value of those companies will grow over time. Therefore, you expect those companies to abide by the law, but to act in the best interest of their shareholders which includes minimizing expenses and taxes, and maximizing earnings just like you do as an individual.  If they do not, their stock will not grow in value and your retirement security will be jeopardized while the funding by your plan sponsor becomes more costly (look at various state pension funds using generous growth assumptions).

Now consider the rhetoric on the campaign trail which seeks to provide you with an easy scapegoat to blame for just about anything you can think of.  Most of it is one-dimensional without consideration of the big picture or the integrated complexities of our economy.


That “greed” is what fuels our economy and your job and future retirement security. Extracting more in taxes from corporations is hardly a move creating more jobs.

If we had a totally fair and comprehensible tax code with responsible spending we might get somewhere. As it is you are merely being played for fool; being cajoled into thinking that fixes targeting the scapegoat of the day will make everything better with no consequences. 

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2 replies »

  1. That is why I am in favor of Mr. Trumps tax plan. Exempt the first $50,000 from federal taxes for everyone, that way many would only have to pay Social Security and State income tax. That way if Social Security taxes have to be raised to cover the shortage, it would have less of an impact on lower income workers.

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