This is something I’ve been thinking about for a while, and now that the Democrats are casting (some might say flailing) around for ways to make society ‘more fair’, it might be the perfect time for someone to try to introduce the appropriate legislation.
The thing about a corporation is that it produces some product, or provides some service. And any money it has to spend to do that is deducted from the income it earns by selling this product or service.
So, let’s say your company sells $1M worth of widgets each year. You don’t pay taxes on the whole $1M, right? Maybe you spend $200K on materials, $300K on labor, $100K on facilities, and another $200K on various other expenses, like shipping, insurance, and so on. So your expenses are $800K, and you pay taxes only on the remaining $200K.
The thing about a family is that it also produces a product: citizens. And this product is far more important than any other kind of product or service that you can think of. We know this, because we’re apparently willing to bankrupt ourselves in order to fund just one aspect of its development (education).
So the question I’d like to ask is: Why can’t we treat a family like a corporation? In fact, why can’t we classify families as special types of corporations, which we might call ‘family corporations’, or F-corporations?
Right now, a family brings in some income. It gets some standard deductions for any children it has, but those don’t begin to approach the cost of raising those kids. Then it forks over a significant portion of that income in taxes, and tries to get along on what’s left.
What if we did this instead: A family brings in some income, and whatever part of that income it uses to raise its children — to produce for society — is deducted from its taxable income, just as it would be for a C-corporation.
Of course, just as with C-corporations, only certain kinds of expenses would be allowed. Clothes, yes. Trips to Disney World, no. Food, yes. Junk food, no. Private schools, yes. Yacht club memberships, no. Educational materials, yes. Video games, no. Diapers, yes. Halloween costumes, no. And so on.
Now, what’s interesting about this is, a C-corporation often finds itself facing a choice: try to save money, and end up giving a big chunk of the savings to the government; or spend more money on higher quality goods and services instead. So its employees fly business class. They eat in nicer restaurants. They go to professional development courses. They buy better computers, better software, better furniture, and so on.
And isn’t that exactly how we’d like parents to behave? The reason they can’t is that we tax their incomes first, and let them struggle to provide for their kids on what’s left.
What we should do instead is let any family set up an F-Corporation, which would operate by the same basic rules as a C-corporation (with the exception of not being able to sell shares). It would keep receipts for expenses related to its product, and would use those expenses to reduce its taxable income.
It would, in short, be taxed after expenses, rather than before expenses — just like a C-corporation.
Now, if you think — as many Democrats surely do — that corporations get too many breaks, how can you be against putting families on an equal footing? And if you think — as many Republicans surely do — that there is nothing more important than supporting the family as the basic unit of society, how can you be against giving families the same breaks that we now give to businesses?
In short, who could possibly be against this? I’m just amazed that we haven’t already done it.
