Who will win the 2011 election?

[rainman]

It's a fucking COST. Y'know: not income. Tax free? why the fuck should you pay tax on income you never made?

Look, this isn't difficult:

I trade, make profit, and get taxed on that. From my after tax surplus...

1) ... I buy a widget, mark it up and sell it. The widget is no longer generating any income for me. I deduct its entire cost from my revenue from the new sale and pay tax on the profit.

2) ... I buy raw materials and make a widget by hand, then sell it. I deduct the cost of all the stuff that made up the widget from my revenue, and pay tax on the profit.

3) ... I buy a machine to make widgets. It lasts for years, happily making widgets that I sell for more profit. I need other raw materials to make widgets. I deduct the full cost of the raw materials as they are consumed, and the cost of the machine as it's "consumed" (depreciated), and pay tax on the profit.

Spot the pattern?

It's all consistent, there is no big government conspiracy to wrest your hard won funds from you and tax them "early". If you want business investments to be tax free then why not any other cost of sales?

Think of farming again. I buy an animal for cheap, fatten it up and sell it some years later. During this time it may produce offspring which will in turn generate more offspring and income. It may die and be worthless. Each year after I bought it I pay tax on it, as part of sales less purchases plus opening stock (valued in a variety of ways) less closing stock. But I haven't sold the animal at that stage and realised the cash income. Unjust or not?

[schrodingers cat]

I sometimes think it should be mandatory for folks to have a go in business for themselves.

Put your nuts on the line and hold the check book and you'll start to see how shit works.

People bitch endlessly about (nanny pc) government but there does seem to be an underlying attitude that the gubbermint should look after us. Give us jobs. Give us money for not having a job. Smack the rich bastards blah blah

Some personal responsibility goes a long way

Ownership, accountability, responsibility: These attitudes will help you achieve
Blame, excuses, denial: Here is the road to failure

[oldrider]

The mood of the nation will be dark if the "All (tween)* Blacks" don't improve their performance from last night! * (best between RWC's)

John Key's government could cop the backlash, such is the fickleness of the NZ electorate!

[Ocean1]

Spot the pattern?

Yes. Only an accountant wouldn't spot the fact that #1 and #2 generate immediate income which is appropriate to tax, whereas #3 represents an immediate cost which may be mitigated over several years. With careful planning and hard work it MIGHT even play a part in increasing your income. 'Er majesty's best have the same blind spot, they want "their" money now, so if you want to spend $100,000 on, say a CNC lathe but you're prudently gun-shy of borrowing you actually need to save up $133,000, an extra $33,000 to cover the cost of what can only be described accurately as a protection racket.

Not a rort? Fuck off, Al Capone would be proud of the scale of it.

Think of farming again. I buy an animal for cheap, fatten it up and sell it some years later. During this time it may produce offspring which will in turn generate more offspring and income. It may die and be worthless. Each year after I bought it I pay tax on it, as part of sales less purchases plus opening stock (valued in a variety of ways) less closing stock. But I haven't sold the animal at that stage and realised the cash income. Unjust or not?

Spot the incentive for Govt to prune the tree AFTER it's grown?

You're looking for consistency of application in tax between capital plant and stock. I simply see an added disincentive for business owners to invest in the future of their business and, by simple extension the future of their employees and their country.

[rainman]

The mood of the nation will be dark if the "All (tween)* Blacks" don't improve their performance from last night! * (best between RWC's)

John Key's government could cop the backlash, such is the fickleness of the NZ electorate!

Now there's an interesting element that gets back towards the topic.
Three scenarios:
1. ABs are eliminated early (or beaten by France on the 24th)
2. ABs get a place but not first, say 3rd
3. ABs win

Do any of these have an impact on the election in real terms?

(Bonus question driven entirely from self-interest: do you think any of these have an impact on house prices? )

[rainman]

Yes. Only an accountant wouldn't spot the fact that #1 and #2 generate immediate income which is appropriate to tax, whereas #3 represents an immediate cost which may be mitigated over several years.

You're missing the point of which income it is: past income is taxed, consistently. Future income (generated by the sales of new stock, manufacture, or your lathe) is taxed, consistently. How did you make the money to buy the lathe in the first place? Think it through, or go ask your accountant. It really isn't a gummint conspiracy to take your hard earned wealth.

Not all debt is bad, either - if buying the lathe s a really good idea and you don't have all the cash now, the numbers with some borrowing may stack up, if you shop intelligently. If the tax on the income you've already made (which you're going to have to pay regardless) is the make-or-break factor in buying the kit then you have bigger problems and shouldn't buy it.

EDIT: Or just lease the thing?

[Winston001]

I understand Ocean's point although its hard to see how else capital purchases could be treated.

In the example above, the new lathe might be essential to replace an old one. No new lathe = close the business. The capital cost is a big lump to find in one hit.

This is a good example of the capital limitations many businesses face. To increase production it isn't possible to extend the existing building 10m, and to stretch existing plant like a piece of elastic: or buy 1/8 of another lathe. Its all or nothing. A complete new building plus new machinery is required to take the next step.

Businesses regularly get broken when they expand and it doesn't work out.

[rainman]

Businesses regularly get broken when they expand and it doesn't work out.

Yeah, that's why they need to do it intelligently. Major expansion is seldom done from cash surplus in my experience.

[Ocean1]

Major expansion is seldom done from cash surplus in my experience.

You're right. And if you haven't worked out why yet you never will.

[jonbuoy]

I sometimes think it should be mandatory for folks to have a go in business for themselves.

Put your nuts on the line and hold the check book and you'll start to see how shit works.

People bitch endlessly about (nanny pc) government but there does seem to be an underlying attitude that the gubbermint should look after us. Give us jobs. Give us money for not having a job. Smack the rich bastards blah blah

Some personal responsibility goes a long way

Ownership, accountability, responsibility: These attitudes will help you achieve
Blame, excuses, denial: Here is the road to failure

Too true, nanny states might piss some people off but its nice to know sometimes that nanny is there if you fall hard on your arse one day.

[mashman]

my lord. sense from a politician

[Oscar]

my lord. sense from a politician

What sense?
She's a failure.
She had nine years in Government.
What did she do, apart from making more people dependant on welfare?

[mashman]

What sense?
She's a failure.
She had nine years in Government.
What did she do, apart from making more people dependant on welfare?

I don't care who she is, or what she hasn't done.

"That's why Labour says it's time for politicians to come together on this issue and develop a cross-party agreement for the sake of our children."

That sense. Politicians sharing a common goal

"Sadly, so far John Key has denied the request for cross-party agreements on child welfare citing a disagreement over National standards as a reason not to engage with other politicians."

bwaaaaaaa ha ha ha haaaaaaaaaa.

[Oscar]

I don't care who she is, or what she hasn't done.

"That's why Labour says it's time for politicians to come together on this issue and develop a cross-party agreement for the sake of our children."

That sense. Politicians sharing a common goal

"Sadly, so far John Key has denied the request for cross-party agreements on child welfare citing a disagreement over National standards as a reason not to engage with other politicians."

bwaaaaaaa ha ha ha haaaaaaaaaa.

So you fall for Labour propaganda, but not National's.
That just makes you a red idiot, rather than a blue one.

[mashman]

So you fall for Labour propaganda, but not National's.
That just makes you a red idiot, rather than a blue one.

... whew, wed is me favouwite colour.