Spolu 23: Tax Cascading

I’m pretty sure some financial experts will criticize the previous section. Taxing post-tax profits is called tax cascading.

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.