> He wants to be able to write off the purchase of planes as expenses? What? They already get to write off depreciation on planes,
Expenses are now, depreciation is later. And, if you get one, you don't get the other.
I don't know how all the numbers work out, but it could easily be that the tax code encourages borrowing by corporations for things subject to significant depreciation terms. (Interest paid is an expense.)
> but you can't write off the whole plane because you can sell the damn thing after you buy it.
You just record such a sale against expenses, that is, "net everything".
I do think that expenses should be tied to cash expenditures. So, if a company borrows to buy something, it should only be able to expense what it actually paid in any given year. Such treatment would make all expenditures "equal" in some sense.
No, there is a distinction between cash flows, and income & expenses. An income or an expense does not require a cash flow, and a cash flow is not necessarily an income or an expense.
Expenses should not be tied to cash layouts, because:
(a) purchases are not necessarily expenses, but may be the buying of income-generating assets (i.e. expense is allocated over the life of the asset in the form of depreciation).
(b) You can have an expense without laying out cash (e.g. an asset loses value such as a debtor defaulting).
Expenses are now, depreciation is later. And, if you get one, you don't get the other.
I don't know how all the numbers work out, but it could easily be that the tax code encourages borrowing by corporations for things subject to significant depreciation terms. (Interest paid is an expense.)
> but you can't write off the whole plane because you can sell the damn thing after you buy it.
You just record such a sale against expenses, that is, "net everything".
I do think that expenses should be tied to cash expenditures. So, if a company borrows to buy something, it should only be able to expense what it actually paid in any given year. Such treatment would make all expenditures "equal" in some sense.