Thread: corporate taxes....be they really so high?

Not every corporation has a congressman or dozen in their pocket.

Originally Posted by 9aces

Not every corporation has a congressman or dozen in their pocket.

ahoy 9aces,

aye, that be true.

but doesn't it seem like that the corporate tax rate indeed, on average, be nowhar as high as many talkin' heads and politicians hath led us to believe?

- MeadHallPirate

Originally Posted by MeadHallPirate

i mean, imma unclear how Boeing, which recieves soooooo much monies from taxpayers fer our massive military spendin', actually pays such a pittance in corporate taxes.

Well Boeing is one of the very few companies that I can see the logic of lower taxes depending on the situation. Boeing employs tens of thousands of technical workers, and accounts for a large share of our exports. Therefore it would seem to be in our national interest to keep them in business. Their only competition is Airbus which could put Boeing at a disadvantage if their effective tax rate wasn't comparable to Airbus. Airbus has been heavily subsidized in the past, so I'm not sure what their tax-rate currently is. Whatever Airbus's effective rate is, is what we should make Boeing's effective rate.

On the whole though, you're right on. Its not the corporate "tax rate" that matters. Its the "effective tax rate" that matters, and for the US that seems to be ~17-20% or so for profitable corporations.

Since corporations ultimately put the cost of taxes into their products, I don't think its unreasonable to envision a corporate tax system where corporations pay zero tax in return for keeping jobs in the US. On the other hand, that means the workers would see their cost of living go up because their taxes would be higher to generate similar tax revenue for Uncle Sam. Consequently, those corporations would have to pay their US workers more, which probably wouldn't be much costlier than the original situation of just paying 20% tax.

Remember also that corporations only pay tax when they actually make a profit. They pay zero tax when they lose money because gross revenue minus expenses puts them in the red, and they don't pay any tax then. In fact, they can probably income average or perform other accounting tricks to get some tax money back during lean or unprofitable years.

In short, our system of taxation is phenomenally corrupt.

The heavy focus our system has on deductions is what allows corporations to pay less in taxation here than most of our peers, so as MHP pointed out, the rates don't matter so much.

The same is somewhat true of personal taxation. The wealthy only truly have to pay the AMT, when you figure in deductions. This is because you can't deduct below the AMT.

It starts at about 26% and tops out at 28%, so what the top 1% really pays is usually no higher than 28% of their income.

Originally Posted by Occam's Razor

In short, our system of taxation is phenomenally corrupt.

The heavy focus our system has on deductions is what allows corporations to pay less in taxation here than most of our peers, so as MHP pointed out, the rates don't matter so much.

The same is somewhat true of personal taxation. The wealthy only truly have to pay the AMT, when you figure in deductions. This is because you can't deduct below the AMT.

It starts at about 26% and tops out at 28%, so what the top 1% really pays is usually no higher than 28% of their income.

Amen.

The purpose and function of taxation has shifted from a legitimate means of raising revenue, to back door legislation - allowing congress to manipulate the population in ways that aren't enumerated in the constitution. If we want real fairness in taxation we need to let go of the idea that we can, or should, use taxation to "incent" desired behavior.

Originally Posted by Occam's Razor

In short, our system of taxation is phenomenally corrupt.

The heavy focus our system has on deductions is what allows corporations to pay less in taxation here than most of our peers, so as MHP pointed out, the rates don't matter so much.

The same is somewhat true of personal taxation. The wealthy only truly have to pay the AMT, when you figure in deductions. This is because you can't deduct below the AMT.

It starts at about 26% and tops out at 28%, so what the top 1% really pays is usually no higher than 28% of their income.

That's kind of a wrong interpretation of AMT. Basically, what AMT does is refigures someones taxable income without including certain preference items and then that person pays the greater of AMT or regular tax. In a nutshell AMT increases the amount of tax someone would have to pay if their deductions were to put them below 28%.

Originally Posted by dblack

Amen.

The purpose and function of taxation has shifted from a legitimate means of raising revenue, to back door legislation - allowing congress to manipulate the population in ways that aren't enumerated in the constitution. If we want real fairness in taxation we need to let go of the idea that we can, or should, use taxation to "incent" desired behavior.

Agreed. We should simply have rates.

We also need something that most of our peers have -- a minimum amount of income that doesn't get taxed.

For example, in Canada, you aren't taxed on the first 10,382 Canadian dollars (10,777 US dollars) you make.

....and yes, the Canadian dollar is currently worth more than the American dollar.

Originally Posted by lutherf

That's kind of a wrong interpretation of AMT. Basically, what AMT does is refigures someones taxable income without including certain preference items and then that person pays the greater of AMT or regular tax. In a nutshell AMT increases the amount of tax someone would have to pay if their deductions were to put them below 28%.

The wealthiest of the wealthy usually have access to enough deductions that their total "regular" taxation would normally be below the AMT (if the AMT didn't exist).

Originally Posted by Occam's Razor

The wealthiest of the wealthy usually have access to enough deductions that their total "regular" taxation would normally be below the AMT (if the AMT didn't exist).

Is that a fact? What deductions might those be?

Is it itemized deductions which start getting phased out starting at $167k?
Is it dependent deductions that start getting phased out at $250k?
Is it the ability to deduct IRA contributions which can get phased out at $167k?
Is it the tuition credits that you can't take if you make too much?

I'm no expert but I have never heard of the "I'm rich so I get all kinds of specisl deductions" deduction.

Originally Posted by Disillusioned_1

Well Boeing is one of the very few companies that I can see the logic of lower taxes depending on the situation. Boeing employs tens of thousands of technical workers, and accounts for a large share of our exports. Therefore it would seem to be in our national interest to keep them in business. Their only competition is Airbus which could put Boeing at a disadvantage if their effective tax rate wasn't comparable to Airbus. Airbus has been heavily subsidized in the past, so I'm not sure what their tax-rate currently is. Whatever Airbus's effective rate is, is what we should make Boeing's effective rate.

ahoy Disillusioned_1,

but me friend, would this not be grounds then fer punitive economic reprisals from our vessel to france? how can they be a trade partner if thar government ladles gold in heaps fer Airbus to trounce Boeing?

On the whole though, you're right on. Its not the corporate "tax rate" that matters. Its the "effective tax rate" that matters, and for the US that seems to be ~17-20% or so for profitable corporations.

Since corporations ultimately put the cost of taxes into their products, I don't think its unreasonable to envision a corporate tax system where corporations pay zero tax in return for keeping jobs in the US. On the other hand, that means the workers would see their cost of living go up because their taxes would be higher to generate similar tax revenue for Uncle Sam. Consequently, those corporations would have to pay their US workers more, which probably wouldn't be much costlier than the original situation of just paying 20% tax.

Remember also that corporations only pay tax when they actually make a profit. They pay zero tax when they lose money because gross revenue minus expenses puts them in the red, and they don't pay any tax then. In fact, they can probably income average or perform other accounting tricks to get some tax money back during lean or unprofitable years.

matey, also, would not them powerful and wealthy corporations fight any measure that would raise thar corporate tax about 1%...or 7%....or 15%, or whatever they currently be payin'?

- MeadHallPirate

Originally Posted by lutherf

Is that a fact? What deductions might those be?

Is it itemized deductions which start getting phased out starting at $167k?
Is it dependent deductions that start getting phased out at $250k?
Is it the ability to deduct IRA contributions which can get phased out at $167k?
Is it the tuition credits that you can't take if you make too much?

I'm no expert but I have never heard of the "I'm rich so I get all kinds of specisl deductions" deduction.

As far as I understand it, the itemized deduction limits were phased out for the 2010 tax year. Now, supposedly, they're going back to 2006 levels for the 2011 tax year, but even if that applies, that still allows for far more in deductions than you're listing here.

If the taxpayer's adjusted gross income is above a threshold (or "applicable amount"), then the total allowable itemized deductions is reduced by 1/3 of the lesser of 3% of the excess of adjusted gross income over $166,800; or
80% of the total itemized deductions otherwise allowable.

In 2009, the threshold adjusted gross income is $166,800 ($83,400 if married filing separately).
So, for example, if your adjusted gross income is $300,000 and you have $20,000 in itemized deductions, first figure out 3% of the excess above $166,800: .03(300,000 − 166,800) = $3996
Then figure out 80% of the total deductions .80(20,000) = $16,000
Finally, determine which value is lesser, then take 1/3 of this value. In this instance, the lesser value is $3996 so the taxpayer's total itemized deductions shall be reduced by $3996 divided by 3, or $1332. This means out of the $20,000 itemized deductions claimed, only $18668 will be allowed.

$20,000 − $1332 = $18,668

Itemized deduction - Wikipedia, the free encyclopedia

That's how the limits worked for 2009. Even with the slightly more restrictive limits of the 2006 levels, that easily allows for someone to deduct down to the 28% AMT in most cases.

I think a big problem of the US is rather the unfair / unbalanced tax system which did not attept to the new realities.

Most US Tax revenue comes from being productive... income tax & corperate tax. Other nations around the world have smarter tax systems.
Most countries have high consumption taxes (VAT, Energy, tabacco,...) and so on.
Here are the top sources of tax revenueof Germany in 2008:

1- VAT
2- Personal Incometax
3- local business tax
4- Energy taxes
5- capital returns tax
6- corperate income tax

Corperations, as evil and nasty they are at times, they also have international competition. So bashing them all is a wrong aproach. Especially since strict legislation would hit the mid-size buisnesses (jobs) alot harder than the evil corperations. In the US, the discussion is so heated up, they are just to fucking stupid to make any logical conclusions...
Tax consumption, a VAT on everything of 16% (exclude neccessaties), with the goal to reduce taxes on productivity in the long run.

On the subject of evil Corperations:
If you want to know which sectors have fucked up your system the most... just follow the profit. Just look at profit margins... so how much of their revenue is profit. If that is above 10% you have something that is distorting the market...
In case of corperations like Google or Apple it's their technology/marketing skills in a new & developing market... nothing really wrong there... success to the best, eh?

But Energy, Insurrance, Banks,... all those who are operating in an "old" market which should be on a level-playingfield.... if they got 10..15 or 20% profits... that's not because they are great, that's because of corruption, subsidies, beneficial legislations... => market distortions.

You can check the Forbes Global list and sort by profits...
American Corperations Dominating the top positions are involved in Energy, Banking, Retails (Wal Mart), Drugs & Medicine, Banks, Drugs, banks,...
They make Americans their bitches....

In 2010... just adding up the profits of US Oil, Drugs & Banking Corps in the top 100 => Something like $130 billion.
In 2007... it was about $270 billion ...

Suckers

hoy there Pirate,

Ye, be quotin' this...

A New York Times analysis this week of the 500 companies in Standard & Poor's stock index found that 115 paid less than 20 percent in corporate taxes and 34 paid less than 10 percent over the past five years.

Yarrr! The S&P 500 be merely a few hundred of the mightiest corporations out of millions of corporations.

Wise Captains that be knowledgeable o' the philosophy of logic and reason immediately be recognizin' that using that small sample o' the corp's that can afford to pay tribute to congresscritters as evidence of a low overall corporate tax rate in the US be an example of an unrepresentative sample fallacy.


- Capt'n Hairball