ABBA and the Story of the Most-Inane-Ever Tax Controversy | International Liberty

I’ve complained about this sort of thing for years.

The tax code is a complicated nightmare, particularly for businesses.

Some people may think this is because of multiple tax rates, which definitely is an issue for all the non-corporate businesses that file “Schedule C” forms using the personal income tax.

A discriminatory rate structure adds to complexity, to be sure, but the main reason for a convoluted business tax system (for large and small companies) is that politicians don’t allow firms to use the simple and logical (and theoretically sound) approach of cash-flow taxation.

Here’s how a sensible business tax would work.

Total Revenue – Total Cost = Profit

And it would be wonderful if our tax system was this simple, and that’s basically how the business portion of the flat tax operates, but that’s not how the current tax code works.

The UK-based Guardian is reporting on the supposed scandal of ABBA’s tax deductions. Here are the relevant passages.

The glittering hotpants, sequined jumpsuits and platform heels that Abba wore at the peak of their fame were designed not just for the four band members to stand out – but also for tax efficiency, according to claims over the weekend. Abba…And the reason for their bold fashion choices lay not just in the pop glamour of the late 70s and early 80s, but also in the Swedish tax code. According to Abba: The Official Photo Book, published to mark 40 years since they won Eurovision with Waterloo, the band’s style was influenced in part by laws that allowed the cost of outfits to be deducted against tax – so long as the costumes were so outrageous they could not possibly be worn on the street.

When I read the story, I kept waiting to get to the scandalous part.

But then I realized that the scandal – according to our statist friends – is that ABBA could have paid even more in tax if they wore regular street clothes for their performances.

In other words, this is not a scandal at all. It’s simply the latest iteration of the left-wing campaign (bolstered by tax-free bureaucrats at the Paris-based OECD) to de-legitimize normal and proper tax deductions.

Continue reading ABBA and the Story of the Most-Inane-Ever Tax Controversy | International Liberty.

Dan continues on to discuss why we should have a flat tax. he’s right of course. Absolutely, positively right. But, short of a miracle, we never will. Why?

  • The IRS controls us (including business) by their ruling on what we can deduct. Many more things can be done with 50 cent dollars, after all. The may or may not (usually not) be the right things for long term growth, like modernizing the plant. Buying the boss a new Mercedes may look better on the (adjusted) bottom line. And so we distort the market from what it really is, and introduce artificial inefficiencies into it.
  • Politicians love to be lobbied for special favors, without deductions, there would be a fair system, and no favors to grant (or refuse).
  • How many lawyers make a living trying to get people a fair deal from the IRS?
  • Same story for the few remaining unions that haven’t self destructed.
  • How many people (sorta) work at the IRS? With a flat tax, we might need one tenth of that.
  • How many people spend their lives working with the tax code,  almost all of them would have to find productive work.
  • The malappropriation of funds causes a reduction in the wealth created, not to mention new products not created and all the rest. When we waste our time doing stupid stuff, we can’t reuse that time for important stuff.

And remember the IRS, is not productive, even for a government body. All they do is collections, and every dime they spend is not spent on what might, arguably be a productive program. I admit that’s unlikely but it’s also true that the money could have been left in the private sector, where it almost certainly been productive.

And as to The Guardian’s, and the rest of the statists, shock that someone would arrange their affairs to minimize the tax due, I would reply with Justice Learned Hand

Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.

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