Come to the People's Republic of Washington... We have a B&O tax which is a tax on GROSS receipts. It's 0.5% on manufacturing and sales. And it's 3 times as high for a service industry as for a manufacturing industry, meaning as a consultant I pay 1.5% tax on every dollar brought in, regardless of whether or not I actually make a profit.
When I got my refi mortgage, my brother in law was my broker. He did a great job, got me an extremely low rate. But because I was self employed and my income was all over the map (on tax returns, too), I had no choice but to do a stated income loan; having a tax return history of net income of $80K, $12K, $65K, and $9K for the previous 4 years was too chaotic. Never mind the taxable income was driven by business purchases and deductions, and cash flow was always great...
Minnesota just put a lot of self-employed people off the home buyer's rolls. Self-employed/small businesses just have a chaotic net income. That truck my neighbor the plumber just bought took his annual net income down to near-nothing. It is a legitimate business expense. But purchasing it for cash pretty much will wipe out most of his gross income this year, in terms of taxes. Which is one of the benefits of being self-employed. But this change would make it impossible for him to buy a house, never mind he lives a very high-middle-class/low-upper-class lifestyle.
I’m in more or less the same boat (minus the tax on gross).
My remaining mortgage is almost gone though. Got that while I was still a sucker working crazy hours on salary.
Thank you, PSS, for a sound and sensible post and a story from the consumer side as to why this is bad legislation.