http://www.cbpp.org/9-4-99tax-rep.htm states:
[ul][li]The top 20 percent of households is projected to receive 50.4 percent of the national income in 1999 []the richest one percent of the population is projected to receive as much after-tax income as the bottom 38 percent combined []If the richest one percent of households paid the same percentage of income in federal taxes in 1999 as this group paid in 1977, these households would pay an average of at least $40,000 more in taxes this year.[/ul][/li]Also handy is http://www.census.gov/hhes/income/incineq/p60tb1.html.
BTW, a good book that isn’t intended for economists is Taxing Ourselves by Joel Slemrod. Don’t worry this isn’t Tax Theory for Dummies, nor is it Using Topological Calculus to Determine Optimal Tax Systems.
It is a readable, yet comprehensive, intelligent layman’s guide to taxation in theory and in practive.
Another reason to avoid taxing corporations: If the corporation is not taxed on income, it will have more incentive to re-invest profits and grow. If it pays the profits out to shareholders, executives, etc., then THEY are taxed. That seems about the right way to do it to me - if individuals benefit from corporate profit, tax 'em. If not, let the corporation hang on to the money and use it to grow the economy.
Executive Compensation: I know the prevailing attitude is that executives are over-compensated, but this attitude is usually held by people who think that corporate executives are just a bunch of fat cats who contribute very little. The fact is, a top-notch executive is worth far more than any compensation he could ever get. When GE’s new top boss came in, he engineered a change to ‘Six Sigma’ engineering practices, and by all accounts this is saving the company 150 million a year now, and is projected to save the company over a billion a year within 10 years. How much is a guy like that worth? How much should someone like Steve Jobs be compensated? This is a guy who seems to have singlehandedly brought Apple back from the brink of extinction. How about Lee Iacocca at Chrysler?
There are very few corporate executives who are just lazy bums. Most work their way up the ranks by proving at every step of the way that they are increasing the value of the company they work for. As they gain more power and have more influence, the value they bring increases. As a result, their salaries increase. People like this are few and far between, and companies have to reward them handsomely to keep them. There’s absolutely nothing wrong with that.
first, I mentioned the “little guy” shareholders, the ones who own less than 15, they are consistently ratfcked. Second, the “stock options” make good $$, yes, but not from dividends, from SELLING the stock. It is becoming more common to “eat up” all the profits in executive pay, but have the stock go up, often by havung an employee layoff.
As for S corps, you can NOT put any personal deductions on the corp return. I have seen a lot of people try. True, the NET flows to your 1040, but if you reduce the NET thru bogus deductions, there is less to pay. And, only certain personal expenses are deductable, which do not include personal use of cars & jets, vacations, groceries, etc.
As far as C corps go, true, you cannot “mix” the funds/income, but you can set them up to shelter income at a lower rate. A lot of Drs & attorneys do it on a soley owned corp. Tou can also get the corp to give you “fringe”
benefits, which are persaonal in nature, and nontaxable.
You make have had a C corp, but I am an enrolled agent, I set up & do taxes for them. (No “big” corps, tho)
Tominator2 said:
So I assume that you are using this stat to show that rich people pay less tax than they used to? Not disagreeing, just trying to understand.
and then:
I think it would be more interesting, at least to me, to see a comparison like this:
- The rich receive as much annual income pre-tax as the lowest A% of people.
- The rich pay as much tax as the lowest B% of people.
- Compare A% and B%.
Corporations are distinct entities; their corporate existence is more than just a veil.
As entities unto themselves, they make decisions of their own, decisions that their shareholders wouldn’t necessarily make. ‘Shareholder democracy’ on the whole is BS; most large corporations try to keep shareholders from expressing their opinions, at stockholder meetings, about the conduct of the corporation. If I own stock in XYZ Corp., and don’t like the way it’s forcing its suppliers to relocate factories to Indonesia and pass the savings through (like GE is doing in practice, right now), I’d have a difficult time getting the issue on the agenda at the next meeting, or the one after that. I might even face hurdles in canvassing and attempting to persuade fellow shareholders.
Corporations are free from the moral scruples that individuals face; their ‘morality’ is that of maximizing profits within the bounds of the law.
Corporations are the ultimate single-interest group: flesh-and-blood people have jobs and family and friends, and even the most single-minded have a diversity of interests relative to corporations, which are solely interested in making money. Not that this is evil; it’s just different, and that difference has to be recognized.
The corporation, not the shareholders, decides how much money to pass through as dividends, and how much to reinvest.
These are independent entities; there’s no real reason why they shouldn’t be taxed as such.
Sam Stone weighed in with:
The problem with this is that a similar argument can be made of any tax. (Another reason not to tax flesh-and-blood citizens: if they have the benefit of that money, they can spend less time working and more time raising families, participating in civic life, volunteering, and so forth.) Then you still have to get back to comparing the individual and societal costs and benefits of each tax.
Another reason to avoid taxing Individuals: if the person id not taxed on income, he will have more incentive to re-invest his earnings and grow. RIGHT! :rolleyes:
Getting back to the OP, one thing that many people have pointed out in this debate is that the Federal income tax is far from the only tax around. Therefore, even if the income tax by itself could be said to be unfair, that would say nothing about the fairness, or lack thereof, of our tax system overall.
It’s been pointed out here that the burden of the Social Security and Medicare payroll taxes falls almost entirely on the poor and middle class; someone earning a million bucks a year in salary pays less than 0.5% of that in payroll taxes, while the rest of us pay at 7.65%.
Sales taxes fall most heavily on the poor and middle-class as well; the less affluent you are, the more of your money is being spent in ways subject to the sales tax. This is especially true since purchases over the Web are exempt from sales taxes, and poor people are typically less familiar with the online world than more affluent people.
State income taxes tend to be very regressive. Most states with income taxes haven’t adjusted their rate structure in eons; one typically reaches the top bracket before breaking the poverty line.
In truth, the Federal income tax is the sole significant progressive tax, and to some extent it balances out a host of regressive taxes. For some reason, though, you rarely hear conservatives suggesting reform of the taxes that hit typical working people most heavily (except for the case of Social Security, where they want to shift more of the benefits to the wealthy). Instead, they focus their ire on the income tax, usually discussing it as if it were the only tax in existence, or on the estate tax (‘death tax’), which is the least onerous of all the taxes in America.
oldscratch
Did you read what *I * said? He gave three numbers. Two of those, when compared to each other, are quite definitely useful for his argument. The third is useless on its own, but it does reinforce the other two. So what’s this “his numbers are useless” stuff? All but one provide direct support, and all of them provide either indirect or direct support. You have a weak argument for how one of his numbers is useless, but no arguments for “numbers”, plural.
Only if you start with the premise that per capita taxes are unfair.
avalongod
I don’t pretend to know much about the math of economics…but it seems to me that you just said that for my numbers to work, the minority of people would need to make a significant portion of total income.
[/quote]
Umm, yes, with the minority being the rich. But what’s most important is not just the absolute amount of their income, but how that compares to their taxes. Since you seem to have missed my point before, I will say it again: for your numbers to work, the rich must have a much greater share of national income than their share of the tax burden. And since we already know how their wealth compares to their tax burden (assuming Mr.Z’s numbers are correct), we can conclude that the rich must, if your hypothetical is truly the case, earn 50% of the country’s wealth, but end up with 34%. That’s a rather large discrepancy.
Your sarcasm is completely inappropiate. Nowhere in my post did I ever state or suggest that the amount of wealth that the rich have is small in an absolute sense; it is only small compared to their income. I really don’t understand why you are incapable of participating in a debate without resorting to these immature comments.
The possibility that the poor may somehow manage to end up with 66% of the nation’s wealth, despite only earning 50%, supports your argument? Just how does that work?
avalongod
I never stated that the poor were at fault, merely that “institutional” forces were not at fault.
Kimstu
Dividends are very different from gifts. Suppose I were to get a band together, and hire out our services in the name of the band. Now, every time some paid the band, I would distribute the payment among every member. Should the band be taxed on the original payment, and then have individual members be taxed on their share of that post-tax money?
Actually, a figure of 16-18% would be more correct. In a way, as I said before, the average wage earner pays BOTH halves of fica. However, overall, great post!!!
Ryan:
Again, I do plead ignorance as to economics. However, it seems that you are arguing that their taxes are, percentage wise, higher and that this is a bad thing. This I disagree with, as they can manage the burdon of higher taxes better than the poor.
quote:
~~~Your sarcasm is completely inappropiate.
Sarcasm is all part of the fun dude! :D But if I offended you I sincerely appologize.
quote:
~~~The possibility that the poor may somehow manage to end up with 66% of the nation’s wealth, despite only earning 50%, supports your argument?
you seem to be supporting the widening of the rich-poor class systems in the US. To me, if the rich get a "bad deal" tax wise, I just don't feel bad for them. Such is the burdon of getting rich in the US...you get to help take care of the poor. :) Consider it your good deed for the day!IT would be a scary world to invest if the corporation did not work as a shield. I tend to think of things in terms of liability law suits so let’s say you and three other people create a corporation. One day one of your products injures someone and you get hit for $5 billion in damages, but your insurance coverage added to the value of your corporation comes to $4 billion. If their is corporate shiled, you and your partners now owe $1 billion personally.
Now imagine that your 401k has you stock invested in such a company. Would you bother to invest if you knew that you would be personally liable if that company injured someone?
[aside: It was NOT Rush Limbaugh who cited the stats that I mentioned in the OP]
Even if the middle class and poor pay a higher percentage of Fica and Soc. Security, aren’t the actual amounts paid very small? When you look at income tax you are talking about more than a third of one’s income?
The Ryan (am I the only one who keeps wanting to type this as “Il Riano!”? :)) replied to me:
Hmm? I don’t quite get the band analogy. Surely most corporate shareholders are not working for the corporation. Maybe this is the concept of the “corporate veil” that has been mentioned: all the corporation’s actions are considered to be those of all the shareholders acting unanimously, so its income is just their income. But the real-life picture seems to me (though I’m not an economist, of course) to be much more like what Groucho, er, RTFirefly described. So the corporation, acting as a legal person, sells shares of itself that basically function as coupons for an undetermined amount of profit or loss. It makes income, on which it gets taxed, and at any point the shareholders can redeem their coupons for (hopefully) a profit, on which they then get taxed. I don’t really see a fundamental unfairness in that (and again, if the corporation’s “legal personhood” functions as a liability shield for the shareholders, it seems reasonable that that should also make it subject to income tax and other appropriate artifacts of personhood).
Kimstu
Wait, I think Tretiak’s original point just dawned on me: the corporate-taxation argument isn’t so much about whether it’s right to consider corporations taxable entities as about how to tax their profits most equitably and efficiently. Hmmm. But in that case, why is it necessary to treat a corporation as a “legal person” at all? Were the old “limited liability companies” of a century ago that (to the best of my meagre knowledge) spawned the modern corporation considered “legal persons”?
Kimstu
There is an assumption among the anti-corporation crowd, that teh only good that can come from a corporation is tax money. But corporations offer many societal benefits. Corporation provide not only jobs, but they provide valuable products and services. WIth the excption of small businesses, corporations employ the nation.
Taxing corporations to help the economy is like taking spark plugs out of you engine to make the car lighter and faster.
This prosperity that we are having is fueled in large part by corporations, let’s not screw with it.
Hey, you’ve convinced me Mr Z. We should cease taxing anything or anyone that contributes to the economy through the production of jobs, goods, or services.
hmmm – that leaves whom? The indigent and the jobless? Yeah, let’s make those bastards pay for out infrastructure. They don’t produce nuttin’.
No, what I am saying is that corporations are not just big evil buildings that suck money out of the economy. To the contrary, they drive the economy.
I hear a lot of rhetoric on this board about “evil corporations”. They are not. THe CFO’s, COO’s and CEO’s that I have known are some of the nicest people I have met.
But corporations do make a profit, and we all know that anyone who makes a profit must be hurting other people.
My company here operates on about a 3% profit margin. We have to sell $1,000 in product to make $30. If you slap a 3% tax increase on us, we are insolvent. So we would have to either a) ct jobs, b) cut salaries or c) increase prices.
If you like lower prices and plenty of jobs, don’t mess with corporations.
Of course, you could just lay around the house all day and collect welfare and vote yourself more and more goodies.
OTOH, Mr. Z. (and I’m not going to argue that corporations don’t provide jobs and products, because they do), corporations also use resources, such as land, for which they often pay below market value; they often pay for it with loans offered by cities at low interest which are forgiven or allowed early payoff with no penalties; and they increasingly pay little or no property tax, which only increases the property tax burden on individual homeowners. It isn’t all black and white.
I agree pld. Corporations can indeed do some things that are not to the benefit of others. My point is really that they are not all bad and not evil. And if you look at how much they pay out in salary and in purchases of products from others, I think that their financial benefit is pretty clear.
Hey, I never said corporations were evil (though I agree with RTFirefly that, as legal persons, they are essentially amoral (not necessarily immoral)). I just don’t see why it automatically follows that because they do some good things, they shouldn’t be taxed. Hell, I do some good things but the government still taxes me. 
I would need more evidence than a cute spark-plug analogy to convince me that taxing corporations is intrinsically inefficient or intrinsically unfair.
Kimstu