Taxes: You Pay More Than You Know
The U.S. corporate tax, the second highest on the planet, is a hidden tax where workers end up paying 70 percent of it. It's also a tax with no economic justification on efficiency grounds. So, why are some left-of-center folks so enamored with it? Simple: It's a nearly $400 billion a year tax that most folks are unaware of. So, what if we killed the corporate tax for competitiveness reasons and just raised income and investment taxes, essentially getting rid of the double taxation issue? (Profits are taxed at the corporate level and again as dividends.) Look at this bit of static analysis (it assumes no impact of taxes on economic growth) from the folks at the Tax Policy Center:
It turns out that if you want to finance complete repeal of the corporate tax, you'd need to boost the top three individual rates to an eye-popping 50.1 percent, 59.1 percent, and 62.7 percent, and raise the tax on capital gains and dividends to about 27 percent. If you leave the rates on gains and dividends untouched, taxes on ordinary income would have to double to 56 percent, 66 percent and 70 percent.
But in a way, taxes are already at those confiscatory levels because of the way the tax is passed along to workers and shareholders. We just don't quite perceive it as such.
Tags: federal taxes | taxes | corporate taxes
Tools: 
Share
|
| Comments (3) | Print
Reader Comments
I may pay more than I know
But I think I pay more than I do!
It's an American tradition--we have the right to complain more than is justified by the facts.
The facts are so bad that our complaints are justified.
But I think I'll stay here anyway and just keep complaining.
It's better to complain here than anywhere else I know of.
When Americans become convinced that anything whatsoever will become cheaper or more accessible by eliminating corporate income taxes, then we shall know that the de-education of America by corporations has beccome complete.
Somebody OUGHT to be studying the idea of extracting ALL tax revenue (except P/R tax for Social Security and Medicare) from corporations----including from those little LLCs and S-Corps---instead of from individuals at all.
Corporate taxes
Double taxation of corporate income is a bad idea, but eliminating the corporate income tax without other reforms would be much worse. If corporations were tax-free, they would become the ultimate tax shelter for wealthy individuals. A better option would be to "integrate" the corporate and individual income taxes--that is, attribute corporate income directly to the shareholders and tax that income at ordinary income tax rates. This is the way sole proprietorships, S-corporations, and partnerships are taxed now. It would be fair and would involve no double taxation. It would also involve a much smaller revenue loss than outright repeal of the corporate income tax. (The Treasury Department studied options to do this under the first President Bush. Their report is available here: http://www.treas.gov/offices/tax-policy/library/integration-paper/)
And if the corporate and individual income taxes were integrated, we could suspend the debate about what share of the corporate tax is borne by workers and what share by owners. (It is likely that workers bear only a fraction of the corporate tax burden, notwithstanding the excellent CBO report that produced the 70-percent estimate. As the report noted, the estimate is based on particular assumptions that are unlikely to hold in the real world.)
Add your thoughts
Your comment will be posted immediately, unless it is spam or contains profanity. For more information, please see our Comments FAQ.advertisement
