An interesting thought experiment what would happen if we treated people as corporations. I guess we'd have to raise income taxes quite a bit to make ends meet, as most people spend everything they make.
> what would happen if we treated people as corporations
You'd rename line items and move on. Companies can't deduct any expense. The chief ones are things they've already paid tax on, e.g. wages subject to payroll and purchases subject to sales taxes.
You've said something true that misses the point.
Taxation disproportionately comes from wages, and most in the middle class can't avoid them, even though they are a pillar of the economy.
> Taxation disproportionately comes from wages, and most in the middle class can't avoid them
Totally correct. Ironically, a classic labour vs. capital argument holds water better than people vs. corporations. We absolutely tax returns on labour too much in America and capital not enough. That doesn't really result in concluding that we should let people deduct more expenses or corporations pay on their top line. You're still working at the level of abstractions.
Well, in this case I think the subject also is corporations v. people, as people can't lobby to Congress to get tax breaks. In this particular issue, the problem is both that corporations aren't taxed enough AND that they can evade the law by getting special dispensations.
I'd be upset the most at:
> Congress might give Tesla even more tax breaks. A bill passed by the House of Representatives in the previous Congress would have retroactively reinstated a provision allowing full expensing of research and development expenses which could save the company up to $2.4 billion in taxes.
It may not be that simple, and there are definitely exemptions to what the OP posted. But the principle of it is what most of corporate taxation is built upon, and it's fundamentally different to how taxation works for individuals. Is it logically consistent and/or fair? Doubtful, but it is the way it is, and until we get a law change to happen (in any country - doubtful the world over), it'll stay that way.
> the principle of it is what most of corporate taxation is built upon, and it's fundamentally different to how taxation works for individuals
They're built on a similar principle: you tax earnings. That's why we have a standard deduction. The point was to cover living expenses.
It's clearly not doing that, but the logic is similar. (I'd raise it to $50k+. Cover the cost, about $500 to 600bn, with new tax brackets at $10mm, $100mm and $1bn; a modest increase in the capital-gains rate; and by closing the carried-interest loophole.)
This article is such a cheap and generic anti-corporate jab (Tesla not being unique here at all). Don't get me wrong, I too disagree that expenses can only be written off by corporate entities, but that is just the way it is.
I'm sure if we really unpacked the numbers, we'd see that all of Tesla's employees' salaries that were exempted from Tesla's "taxable income" meant plenty of income taxes being paid over to the government for social welfare and other spending.
No one wants to go down that rabbit hole, because we'd then have to have an honest discussion about why I, as a human, don't get to deduct most of my personal expenses and only pay tax on my "saved" or "non-spent' income. At that point, we'd be getting almost 0 tax income because most people spend a huge chunk of their income on necessary survival and arguably in the "cost" of being an employee.
This is one of those places where a sensible theory leads to a bunch of loopholes in practice.
If we applied a 20% income tax to corporate entities, then buying a car through a dealership would cost 20% more than buying direct from the factory.
You can imagine what that would do to intermediary-heavy transactions, like when I give pension money to a fund marketplace who buy a fund who go to a stockbroker and buy shares; I'd end up paying 20% tax four times in a row.
Of course the problem with letting companies deduct expenses is they can deduct sham expenses to move expenses between tax regimes. Sell your brand name to a company in a tax haven, pay a per-product 'license fee' for the right to use the name, and suddenly you're making zero profit in the place you do all your operations, as all the profit is, on paper, being made in the tax haven.
> If we applied a 20% income tax to corporate entities, then buying a car through a dealership would cost 20% more than buying direct from the factory
You'd also have to add a massive border-adjustment tax, because otherwise I wouldn't buy it from the dealership or the factory, but buy it in Mexico--where producers don't have to pay the tax--and then drive it home.
Not super applicable for a car, I know, but it's a general problem with taxing legal fictions.
Corporate tax is quite misunderstood in my opinion.
Tesla makes revenue, and they have costs. Their revenues are offset by their costs.
Any profit Tesla makes is eventually taxed -- either when Tesla shareholders sell appreciated stock, when the company makes distributions or when they liquidate.
Corporate tax only applies to un-distributed profits carried forward from year to year instead of invested into the business or distributed to shareholders.
I have income and I have costs. Why is my income not completely offset by my costs? I'd love to spend more money to pay fewer taxes.
My labor is turned into profits for my employer and similarly their profit is eventually taxed. In that sense my labor doesn't have to be taxed directly either. Why is it? I think it's absurd that one the hand they are reporting revenue to shareholders and on the other hand they are reporting no profits to tax authorities. Am I misunderstanding something here? I think it's an arbitrary choice that people are supposed to pay for the expenses of the state and corporations are not. I don't think that's a good choice, but that's partially subjective.
> it's absurd that one the hand they are reporting revenue to shareholders and on the other hand they are reporting no profits to tax authorities. Am I misunderstanding something here?
Yes and no. It's clearly an abuse of the tax code. But the idea that a company would have different books for the IRS and itself is no different than you probably having a different set of "books" for your household budget and tax filings. They're held to different standards of precision and serve different purposes.
People also have costs some of which are tax deductible, yet their income is seen to be completely taxed before costs are deducted. In both personal and corporate taxes, some costs are deductible and others not. People understand this.
The point is that people find it a violation of norms how a company can arrange its taxes in a way that a salaried individual basically never can: to basically not pay any taxes while enriching some specific people more than others.
> either when Tesla shareholders sell appreciated stock, when the company makes distributions or when they liquidate.
Feels like a fatal flaw in the law if you can bypass paying the corporate taxes in that way.
That is individual tax - not the tax payed by the corporation. Normally the tax is payed twice. Tax from the corporation profits and then the individual employee/shareholder tax based on their income.
> Normally the tax is payed twice. Tax from the corporation profits and then the individual employee tax based on their income.
Payroll tax is the second check you're looking for.
Tesla is almost certainly fucking around. But the concept of taxing corporate profits--versus earnings--is solid. You massively favour high-margin (tech) over low-margin (manufacturing, service, anything with physical assets) and incumbents over new entrants if you tax the top line.
It really comes to simple process lot of companies operate. They buy some materials, they spend some labour to refine it, sell it, ship it. And what is above all these costs is profit. Taxing them on what they sold for, is not really sensible say with fuel, a low margin product.
Now what can be called cost is very reasonable question. Clearly dividends or stock buybacks should not be costs. And thus such spending should only come from post tax money...
At least today the corporate tax rate is 21%. Individual tax rates in California are as high as like 52%. In almost every scenario you'll see a higher rate on the distributions and buybacks than you would carrying it forward to the following year.
I guess you could make a case for double-taxation but... why?
Income from a corporate entity is taxed twice by the time it gets to an individual. If I own a corporation and live in California, first I pay 21% on the profits and then 52% on what is left before it gets to my bank account.
At these rates, This means the government takes 72 cents out of every dollar of profit.
> Individual tax rates in California are as high as like 52%.
Is that a marginal tax rate (not very useful for comparison) or an effective tax rate? Also, can you explain why income level is required to achieve 52% "individual tax rate"?
Yes, the top marginal rate is 37% federal + 13.3% state + 0.9% surtax -- and note the state tax is generally double-taxed at this income level thanks to the SLPT cap.
Can it also be an effective rate, yes, pretty close anyways.
Those are taxable events for the people who sell the shares Tesla is buying back.
> Then you can also take loans based off of that to make sure you never have to pay taxes again.
You can borrow against the after tax amount yes, you'll pay interest on it and when you die, you will pay the capital gains. On your final tax return, you are required to pay taxes on all of the capital gains you up to your departure. This resets the tax basis for your heirs.
My sense about Tesla: They have nearly all of their R&D in the United States, but they have large global footprint with very large factories in Germany and China. I think a lot of the US-based R&D costs can by used to offset US-based income. Also, does "income" mean "profits" in this context? It is unclear to me. They did not clearly define the term.
To be fair you are welcome to incorporate and follow all the rules regarding what is actually business expenses vs private and most of your expenses can also be tax free.
But I doubt your employer will be too happily to now pay your salary as an invoice to a subcontractor...
You may find it's easier to just pay tax... Also look up effective tax rate vs actual tax rate...
I know many people who despite having a significant portion of their salary being taxes, when you look at their Revenue and Expenses for a given 12 month period they in fact paid no tax.
Your specific situation may be different, but you aren't a corporation.
Low... ish... depending on where you are. Short term gains are taxed as ordinary income, long-term gains are taxed up to 20% (already the corporate rate) and states like California treat it as ordinary income exposing you to another up to 13.3%
> Corporate tax is quite misunderstood in my opinion.
Yeah, it's mechanically different from individual income taxes, but in general Americans don't know how taxes work.
I've had coworkers in the past who believed that if you made juuust enough money to enter a new income tax bracket, you'd actually have less take-home than before. They thought that the entire income was taxed at a new rate, instead of just the marginal dollars that spilled into the new bracket.
I think capitalism or socialism are neither problem nor solution; they're just tools, frameworks. The problem is greed and our willingness to accept it.
> It's a long way from "Flat Tax Maybe Not Good" to "Proletariat, Seize the Means of Production Now!"
And if, just for the sake of argument, we suppose those were equivalent... Then the huge popular support for (1) means those who decry (2) are actually a weirdly out-of-touch political minority with delusions of being far bigger than they are.
> These titles don't exactly sound communist to me...
Then we have a very different understanding. And yes the post war heist that destroyed long term economic common sense all over the western world turned into a permanent ongoing shakedown
That Apple, Google, Amazon, etc do not pay their taxes either makes it worse not better.
The rich have accumulated a lot of money, that is killing the economic system. Redistribution of that wealth is needed for the system to continue working, and taxation is part of the solution.
They aren't losing money, they're spending it [on themselves].
The problems in taxation come when a company's spending isn't benefitting the area/country or its employees' taxable income. Buying offshore yachts to rent back, sinking money into highly-depreciative assets (eg company cars) that might not be taxed as employee benefits. There's a lot to unpack but the bigger you are, the easier it is to hide a few billion dollars from the national taxation service by hauling it off to another area.
This is a poorly written article. They can't even get basic figures right. See Unspecified “U.S. tax credits” were good for $300 billion of tax savings. It should have been $300 million. Seems to be a psyops by an incompetent writer against Elon.
Tax breaks for executive options ?!
> breaks for executive options
Difficult to tie this to executives versus shareholders. Options are taxed.
not too difficult actually, US corps are required to disclose specifics on employee option compensation for tax purposes: https://www.thetaxadviser.com/issues/2023/dec/executive-comp...
FINRA 2360 provides disclosure and tax requirements to any organization which issues options, provides grant exercises, or simply issues stock as compensation: https://www.finra.org/rules-guidance/rulebooks/finra-rules/2...
Side note: the regs are partly why you can see detailed information about types and amounts of stock and option activity by different investor classes in tools like https://www.barchart.com/investing-ideas/insider-trading-act...
So I pay more taxes than one of the highest-valued companies in the world? sure the system works well
Corporations get to pay their costs before paying taxes on what's left.
Only the population pays taxes before their costs.
An interesting thought experiment what would happen if we treated people as corporations. I guess we'd have to raise income taxes quite a bit to make ends meet, as most people spend everything they make.
> what would happen if we treated people as corporations
You'd rename line items and move on. Companies can't deduct any expense. The chief ones are things they've already paid tax on, e.g. wages subject to payroll and purchases subject to sales taxes.
Uh, isn't that exactly like it is for people? They pay taxes on income and VAT
> Only the population pays taxes before their costs
Not that simple. Plenty of individuals pay a negative income tax. Plenty of individuals deduct various expenses.
And if you're a sole proprietor, you get to deduct expenses like a corporation. Labour v capital != corporations v people.
You've said something true that misses the point. Taxation disproportionately comes from wages, and most in the middle class can't avoid them, even though they are a pillar of the economy.
> Taxation disproportionately comes from wages, and most in the middle class can't avoid them
Totally correct. Ironically, a classic labour vs. capital argument holds water better than people vs. corporations. We absolutely tax returns on labour too much in America and capital not enough. That doesn't really result in concluding that we should let people deduct more expenses or corporations pay on their top line. You're still working at the level of abstractions.
Well, in this case I think the subject also is corporations v. people, as people can't lobby to Congress to get tax breaks. In this particular issue, the problem is both that corporations aren't taxed enough AND that they can evade the law by getting special dispensations.
I'd be upset the most at:
> Congress might give Tesla even more tax breaks. A bill passed by the House of Representatives in the previous Congress would have retroactively reinstated a provision allowing full expensing of research and development expenses which could save the company up to $2.4 billion in taxes.
Half of taxpayers pay 97.7% of federal income tax
https://taxfoundation.org/data/all/federal/summary-of-the-la...
It may not be that simple, and there are definitely exemptions to what the OP posted. But the principle of it is what most of corporate taxation is built upon, and it's fundamentally different to how taxation works for individuals. Is it logically consistent and/or fair? Doubtful, but it is the way it is, and until we get a law change to happen (in any country - doubtful the world over), it'll stay that way.
> the principle of it is what most of corporate taxation is built upon, and it's fundamentally different to how taxation works for individuals
They're built on a similar principle: you tax earnings. That's why we have a standard deduction. The point was to cover living expenses.
It's clearly not doing that, but the logic is similar. (I'd raise it to $50k+. Cover the cost, about $500 to 600bn, with new tax brackets at $10mm, $100mm and $1bn; a modest increase in the capital-gains rate; and by closing the carried-interest loophole.)
It would probably be a better system to eliminate corporate tax entirely.
This article is such a cheap and generic anti-corporate jab (Tesla not being unique here at all). Don't get me wrong, I too disagree that expenses can only be written off by corporate entities, but that is just the way it is.
I'm sure if we really unpacked the numbers, we'd see that all of Tesla's employees' salaries that were exempted from Tesla's "taxable income" meant plenty of income taxes being paid over to the government for social welfare and other spending.
No one wants to go down that rabbit hole, because we'd then have to have an honest discussion about why I, as a human, don't get to deduct most of my personal expenses and only pay tax on my "saved" or "non-spent' income. At that point, we'd be getting almost 0 tax income because most people spend a huge chunk of their income on necessary survival and arguably in the "cost" of being an employee.
This is one of those places where a sensible theory leads to a bunch of loopholes in practice.
If we applied a 20% income tax to corporate entities, then buying a car through a dealership would cost 20% more than buying direct from the factory.
You can imagine what that would do to intermediary-heavy transactions, like when I give pension money to a fund marketplace who buy a fund who go to a stockbroker and buy shares; I'd end up paying 20% tax four times in a row.
Of course the problem with letting companies deduct expenses is they can deduct sham expenses to move expenses between tax regimes. Sell your brand name to a company in a tax haven, pay a per-product 'license fee' for the right to use the name, and suddenly you're making zero profit in the place you do all your operations, as all the profit is, on paper, being made in the tax haven.
> If we applied a 20% income tax to corporate entities, then buying a car through a dealership would cost 20% more than buying direct from the factory
You'd also have to add a massive border-adjustment tax, because otherwise I wouldn't buy it from the dealership or the factory, but buy it in Mexico--where producers don't have to pay the tax--and then drive it home.
Not super applicable for a car, I know, but it's a general problem with taxing legal fictions.
Corporate tax is quite misunderstood in my opinion.
Tesla makes revenue, and they have costs. Their revenues are offset by their costs.
Any profit Tesla makes is eventually taxed -- either when Tesla shareholders sell appreciated stock, when the company makes distributions or when they liquidate.
Corporate tax only applies to un-distributed profits carried forward from year to year instead of invested into the business or distributed to shareholders.
I have income and I have costs. Why is my income not completely offset by my costs? I'd love to spend more money to pay fewer taxes. My labor is turned into profits for my employer and similarly their profit is eventually taxed. In that sense my labor doesn't have to be taxed directly either. Why is it? I think it's absurd that one the hand they are reporting revenue to shareholders and on the other hand they are reporting no profits to tax authorities. Am I misunderstanding something here? I think it's an arbitrary choice that people are supposed to pay for the expenses of the state and corporations are not. I don't think that's a good choice, but that's partially subjective.
> it's absurd that one the hand they are reporting revenue to shareholders and on the other hand they are reporting no profits to tax authorities. Am I misunderstanding something here?
Yes and no. It's clearly an abuse of the tax code. But the idea that a company would have different books for the IRS and itself is no different than you probably having a different set of "books" for your household budget and tax filings. They're held to different standards of precision and serve different purposes.
Because part of their cost is to pay for your income. You also get Tax deduction on certain "cost" as well. Just not everything.
> My labor is turned into profits for my employer and similarly their profit is eventually taxed.
Your labour is tuned into revenue first. There are plenty of companies burning through cash for 10 years before making a single cent of profits.
It's not misunderstood.
People also have costs some of which are tax deductible, yet their income is seen to be completely taxed before costs are deducted. In both personal and corporate taxes, some costs are deductible and others not. People understand this.
The point is that people find it a violation of norms how a company can arrange its taxes in a way that a salaried individual basically never can: to basically not pay any taxes while enriching some specific people more than others.
> either when Tesla shareholders sell appreciated stock, when the company makes distributions or when they liquidate.
Feels like a fatal flaw in the law if you can bypass paying the corporate taxes in that way.
That is individual tax - not the tax payed by the corporation. Normally the tax is payed twice. Tax from the corporation profits and then the individual employee/shareholder tax based on their income.
> Normally the tax is payed twice. Tax from the corporation profits and then the individual employee tax based on their income.
Payroll tax is the second check you're looking for.
Tesla is almost certainly fucking around. But the concept of taxing corporate profits--versus earnings--is solid. You massively favour high-margin (tech) over low-margin (manufacturing, service, anything with physical assets) and incumbents over new entrants if you tax the top line.
It really comes to simple process lot of companies operate. They buy some materials, they spend some labour to refine it, sell it, ship it. And what is above all these costs is profit. Taxing them on what they sold for, is not really sensible say with fuel, a low margin product.
Now what can be called cost is very reasonable question. Clearly dividends or stock buybacks should not be costs. And thus such spending should only come from post tax money...
> Clearly dividends or stock buybacks should not be costs. And thus such spending should only come from post tax money
It does. Dividends and stock buybacks are not tax deductiable [1][2].
[1] https://www.thetaxadviser.com/issues/2022/sep/paying-dividen...
[2] https://www.grantthornton.com/insights/alerts/tax/2024/flash...
> Taxing them on what they sold for, is not really sensible say with fuel, a low margin product.
That's what SF instituted with Prop C -- only to see an exodus of low margin tech companies.
At least today the corporate tax rate is 21%. Individual tax rates in California are as high as like 52%. In almost every scenario you'll see a higher rate on the distributions and buybacks than you would carrying it forward to the following year.
I guess you could make a case for double-taxation but... why?
Income from a corporate entity is taxed twice by the time it gets to an individual. If I own a corporation and live in California, first I pay 21% on the profits and then 52% on what is left before it gets to my bank account.
At these rates, This means the government takes 72 cents out of every dollar of profit.
Yes, the top marginal rate is 37% federal + 13.3% state + 0.9% surtax -- and note the state tax is generally double-taxed at this income level thanks to the SLPT cap.
Can it also be an effective rate, yes, pretty close anyways.
At what personal income level does this top marginal rate apply? 250K? 500K? 1M?
Oh yea share buybacks are very nice costs for a lot of companies.
Then you can also take loans based off of that to make sure you never have to pay taxes again.
Those are taxable events for the people who sell the shares Tesla is buying back.
> Then you can also take loans based off of that to make sure you never have to pay taxes again.
You can borrow against the after tax amount yes, you'll pay interest on it and when you die, you will pay the capital gains. On your final tax return, you are required to pay taxes on all of the capital gains you up to your departure. This resets the tax basis for your heirs.
"Those are taxable events for the people who sell the shares Tesla is buying back."
But in which jurisdictions is that tax payable, and at what rates?
There's no general answer to that question. It depends on how long you held it for, where you're resident, and your specific circumstances.
My sense about Tesla: They have nearly all of their R&D in the United States, but they have large global footprint with very large factories in Germany and China. I think a lot of the US-based R&D costs can by used to offset US-based income. Also, does "income" mean "profits" in this context? It is unclear to me. They did not clearly define the term.
> does "income" mean "profits" in this context?
Net income. The article's $2.3bn 2024 "U.S. income" lines up with Tesla's (global) $2.32bn net income (on $1.6bn operating income) [1].
[1] https://www.cnbc.com/2025/01/29/tesla-tsla-2024-q4-earnings....
So in politics companies are people but in taxes they are not?
Or why do I have to pay taxes instead of nothing because I invest in my company aka me?
To be fair you are welcome to incorporate and follow all the rules regarding what is actually business expenses vs private and most of your expenses can also be tax free.
But I doubt your employer will be too happily to now pay your salary as an invoice to a subcontractor...
You may find it's easier to just pay tax... Also look up effective tax rate vs actual tax rate...
I know many people who despite having a significant portion of their salary being taxes, when you look at their Revenue and Expenses for a given 12 month period they in fact paid no tax.
Your specific situation may be different, but you aren't a corporation.
Yes, but that’s not the whole picture. If the value of the company goes up, shareholders capture value as capital gains which has a very low tax rate.
Low... ish... depending on where you are. Short term gains are taxed as ordinary income, long-term gains are taxed up to 20% (already the corporate rate) and states like California treat it as ordinary income exposing you to another up to 13.3%
It's still never higher than income tax, which is what the parent comment was comparing to.
> Corporate tax is quite misunderstood in my opinion.
Yeah, it's mechanically different from individual income taxes, but in general Americans don't know how taxes work.
I've had coworkers in the past who believed that if you made juuust enough money to enter a new income tax bracket, you'd actually have less take-home than before. They thought that the entire income was taxed at a new rate, instead of just the marginal dollars that spilled into the new bracket.
Tesla seems to be a pretty big social welfare beneficiary.
Socialism for the big, capitalism for the rest.
I think capitalism or socialism are neither problem nor solution; they're just tools, frameworks. The problem is greed and our willingness to accept it.
Isn't capitalism based on the idea that everyone is greedy and we should exploit that for betterment of everyone.
And socialism based on the idea that everyone is greedy and we should prevent that for betterment of everyone.
For capitalism to work, you have to limit greed.
For socialism and communism to work, you have to limit greed, envy, and sloth.
I know, but that's just the standard idiom, isn't it?
[flagged]
These titles don't exactly sound communist to me...
It's a long way from "Flat Tax Maybe Not Good" to "Proletariat, Seize the Means of Production Now!"
By your logic, Eisenhower's America was communist because income tax was much more progressive than today.
> It's a long way from "Flat Tax Maybe Not Good" to "Proletariat, Seize the Means of Production Now!"
And if, just for the sake of argument, we suppose those were equivalent... Then the huge popular support for (1) means those who decry (2) are actually a weirdly out-of-touch political minority with delusions of being far bigger than they are.
> These titles don't exactly sound communist to me...
Then we have a very different understanding. And yes the post war heist that destroyed long term economic common sense all over the western world turned into a permanent ongoing shakedown
I'm sure citizens United was purely well intentioned.
Yup, but if I don't pay mine...
Deprecation, loss, etc. Standard for every company. Is this supposed to be an own or something?
> Standard for every company.
That Apple, Google, Amazon, etc do not pay their taxes either makes it worse not better.
The rich have accumulated a lot of money, that is killing the economic system. Redistribution of that wealth is needed for the system to continue working, and taxation is part of the solution.
All you told me is that you don’t understand how depreciation and loss works. If you lose money, why should that be taxed?
They aren't losing money, they're spending it [on themselves].
The problems in taxation come when a company's spending isn't benefitting the area/country or its employees' taxable income. Buying offshore yachts to rent back, sinking money into highly-depreciative assets (eg company cars) that might not be taxed as employee benefits. There's a lot to unpack but the bigger you are, the easier it is to hide a few billion dollars from the national taxation service by hauling it off to another area.
This is a poorly written article. They can't even get basic figures right. See Unspecified “U.S. tax credits” were good for $300 billion of tax savings. It should have been $300 million. Seems to be a psyops by an incompetent writer against Elon.