I’m pretty sure some financial experts will criticize the previous section. Taxing post-tax profits is called tax cascading, which obviously "so evil."
In our example of EZ Productions, EZ received profit distribution from other spolus. But these profit distributions came after these spolus were taxed. So this profit was already taxed. Yet my income statement clearly shows that this income is taxed again. The people in charge of financial theory will be aghast at this double taxation. Let me say this:
A spolu that is in a position to be taxed is in a good financial position. It can afford to pay the tax.
A spolu that increases its profits because it got profit distributions from other spolus is in a good financial position. It can afford to pay the tax.
If a spolu customer gets a 4% refund on purchase it made, he/she/it has a little extra money to pay the taxes on that refund.
In our EZ Productions example, Employee #2 got $5,676 more income from her spolu profit distributions. This amount is an extra 11% above her employment income. Paying taxes on this income does not mean she herself incurs a loss because the spolus who paid the profit distributions were already taxed. She got an extra $5,676, minus whatever taxes she owes. She can afford to pay the taxes on her spolu income.
The financial experts will try to portray the spolu as a system of cascading taxes — and eventually such an economic system will fail. No, the spolu concept will not fail on this matter. If spolus are failing, there will be no taxes and no profit distributions. The fact that many spolus will be first paying taxes and then paying profit distributions — year-by-year-by-year is a sign of a healthy spolu network. Profit distributions help keep some spolus solvent. Profit distributions help other spolus paying more taxes.
Let me explain it in a different way. If the taxes are cascading in the spolu (and taking steam out of the economy), then the profits are cascading at a higher rate than the taxes. Think 80% vs. 20%. The cascading profits are more positive than the negative cascading taxes.
If the spolu network is taxed at 20% of profits, it will likely bring in more tax revenue than the corporate world with a taxation rate of 40% — and all its tricks not to pay that 40%.
By paying the 20% taxes, spolus focus on running their businesses. A spolu business is not a front to minimize paying taxes.
All the stakeholders who get profit distributions will be in better position to pay a bit more taxes.
Here are my spolu axioms again:
1. Keep your business structure simple.
2. Focus on the business!
3. Pay your taxes!
4. Distribute your profits!
Be thankful that your spolu can distribute profits. It’s a sign of a great business.
When 95% of spolus can distribute profits, that is a healthy economy.
Published on Medium 2024
