@davids I agree completely, although your point about capital gains is a good one. Putting more of the tax burden on capital instead of wages would seem to encourage more of what we want (wage growth) and less of what we don't want (enduring concentrations of capital leading to durable, intergenerational inequality).
This is a really clarifying response - thanks.
What you're describing is exactly what I'm seeing/hearing: people using some sort of small business front to hide a bunch of lifestyle expenditures. Not garden variety deductions like mortgage interest or charitable giving.
Some are legit small businesses with a generous interpretation of a business expense. But I also casually know guys who seem to have a side gig small business whose primary purpose appears to be serving as a front to launder their lifestyle expenses and make them business expenses. Fictitiously, but conceptually: Billy Bob likes bikes, so he opens Billy Bob's Bike Shop for which he and maybe his friends are the only customers. Clearly, this bike shop needs a company vehicle to drive for product testing at the mountain bike trails, which should probably be a new F150 or something. The shop also needs an office, which is located at Billy Bob's vacation home two hours away, so a significant chunk of the vacation property and the mileage back and forth all become business expenses. And on it goes. If the kids want a jet ski, the shop becomes Billy Bob's Bike and Jet Ski Shop. As is probably obvious, I have no idea how legal this stuff is, but it doesn't seem uncommon among a subset of the population, and I find the idea of it galling.
What I appreciate about your response is that none of this laundered lifestyle inflation is a path I want to go down.
Bookmarks