10% paying 66% of taxes in unfair to the other 90%?

Great Debates
81

I think we should be careful not to lose sight of the fact that corporations are really a group of employees who provide goods and services.

You can tax corporations all you want to, but it will only serve to inflate the price of those goods and services and decrease pay. If a corporation is taxed you can be sure that it will pass that on somewhere. Using my company as an example (above) a relatively minor tax on us would completely destroy our profits and must result in something detrimental to wither employees or customers. (and by teh way, we already do pay taxes.)

A similar thing happens with the individual. If I am taxed at a 30% rate and I need $60K per year to survive, Then I can’t take a job under $90k. Teh cost of labor goes up, prices go up and less people are hired.

My basic feeling though is if you tax an individual, you create a poorer individual. IF you start taxing businesses heavily, you create a poorer economy, which will then make poorer people.

I was really just trying to challenge the perception that businesses do no good and siphon money from the undertrodden. It is the governments job to siphon money out of the economy.

82

There is nothing a Corp does that an individual, especially a sole prop, doesn’t do. So why tax ANYONE? I mean, a sole prop, because he has to pay taxes, raises HIS prices, and an individual needs more wages etc. So the arguement that a Corp has to raise it’s prices is bogus. EVERYTHING costs more because of taxes. But we all use what taxes buy, so we must ALL, corps too, pay taxes.

The Income Tax used to be a Corp tax, mostly, but now it is mostly on individuals. How is that better?

83

I don’t know if you ever had a corporation move into the apartment upstairs…it’s always STOMP STOMP STOMP at the most god-awful hours.

And how come it is always a corporation that is in the express lane at the gorcery store with 11 items when it specifically says eight items or less. And then they insist on paying by check.

Not to mention how it always seems to be a bunch of snot nosed corporations that are making a ruckus at the movies. You can’t watch a movie in peace any more without a freaking corporation blabbing through the whole thing.

84

Of course, you forget to mention that it is that $30, not the $1000 that is taxable, thus a 3% increase would have you paying a big + 90 CENTS in taxes. I guess that 90 cents would put you out of business quick. Boy, when the price of gas went up 30 cents also, did you go chapter 13?

85

Daniel said:

The problem is not whether just taxing corporation would, in theory be a problem. It is taxing both corporations and individuals. I don’t believe that levying a corporate tax next year would result in a decrease of individual taxes anymore than a surplus will. More money means more goodies to hand out for the pols.

But hey, if you want to make all corporations and business owners pay all of the taxes, what the heck. I would love to take home 100% of my pay. I just wonder what that pay would be.

86

On the 3%, I was talking about net effect. If there were a tax that resulted in $.9 per $1000 rate, I doubt that the IRS would be satasfied.

87

I think part of the problem with public perception, Mr. Z., is that the public doesn’t know CEOs and other corporate executives personally, as people, and so don’t have insight into their decision-making process. Therefore, when XYZ Corporation Inc. posts a 6% increases in earnings, and the CEO makes a salary of several million dollars plus stock options and perks, yet thousands of people lose their jobs as a cost-saving measure, people have a perception that the decision to lay those people off does not weigh heavily on the CEO’s head. I don’t know if, generally speaking, it does or doesn’t. I would hope that putting people out of work is never an easy decision. All the public knows, though, is “XYZ Posts Record Earnings; Layoffs Imminent.” To the average person, that sounds pretty evil.

88

Right, pld. The CFO’s and CEO’s I have met have been, for the most part some of the nicest people I have known. And these decisions would, IMHO, pain them greatly. They have families too.

Part of the problem with public perception is also that few have had to deal with budgets and profit analysis. Sometimes, you look at a department, measure the work flow, look at technological solutions and you realize that you can cut the work load by a substantial amount. IF this happens, you have to find replacement work or cut staff. If you don’t, you are out the door.

The other option is to keep everybody on staff doing 75% of a job. Which means that you have become, in part, a charity. Many corporations have just such a situation before layoffs.

When I think of corporate welfare, I think of someone who is paid to do almost nothing.

Never forget that it is a competetive market. Companies who refuse to be efficient will be creamed. That is, in part, what happened to Kodak when a leaner Fuji Film hit the market. And if your company is getting waxed, you can bet your job will be gone soon.

89

CEOs are hardly the only shareholders. They may hold most of the shares, but a large hunks of it are tied up in you retirement…pension plans and 401ks.

90

avalongod
[2quote]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. 
[/quote]

Well, you're half right. I certainly am arguing that your explanation for how they might have a lower tax rate doesn't work, amnd that they really are paying higher taxes. As for whether this is a good or bad thing, I don't have enough information to say. I think that even if we don't all agree with Mr. Zambezi's opinions, we should still be able to reach agreement on with regard to his facts.


[quote]
quote:

~~~Your sarcasm is completely inappropiate.

Sarcasm is all part of the fun dude! But if I offended you I sincerely appologize. 
[/quote]

Misrepresenting other people's positions is "part of the fun"?


[quote]
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. 
[/quote]

Huh? I point out what I consider to be a flaw in your argument, and you conclude that I support the widening of income inequalities? For me, the issue of whether people are basing their decisions on correct information is often more important than what their decision is, especially since it's usually easier to argue against statements of facts with which I diasagree than statements of opinion with which I disagree.

Kimstu

[quote]
 The Ryan (am I the only one who keeps wanting to type this as "Il Riano!"? )
[/quote]

There are probably more that keep wanting to type your name as "Kimba" :). Come to think of it, "Il Riano" sounds more majestic.


[quote]
Hmm? I don't quite get the band analogy. Surely most corporate shareholders are not working for the corporation
[/quote]

But the bandmembers aren't working for the band either; they *are* the band. If I accept money that should be paid to the band, and then distribute the money later, I am not paying the band, I am distributing a payment that already was made to them, and which I accepted on their behalf.
     Here's somethinmg to think about: suppose a man works at a job and supports his stay-at-home wife (yes, then example is archaic, and perhaps sexist, but it doesn't work if the couple has equal incomes). Suppose he makes, say, $60,000 a year after taxes. He shares this money equally with his wife, so $30,000 goes towards his needs and wants, and $30,000 goes towards his wife's needs and wants. So, why is his wife getting all this money? What is the husband getting in return? Well, she's doing a bunch of housework, taking care of the kids if they have any, etc. So he's essentially paying his wife $30,000 a year to do domestic work. Is this income tax? No. Why not? Because the couple is considered to be one economic unit, and the distribution of the husband's income is considered to be an internal distribution, and not a "real" economic act. IIRC, alimony is not taxed for the same reason. A corporation is also considered a single economic unit, yet the internal distribution of its assets is, for some reason, considered to be a "real" economic act.
   Now, there are certainly arguments for why there should be this tax. But whether this tax should exist and whether it is a double tax are two different issues. And the latter issue does bring up the issue of just when something becomes taxable, an issue that is certainly not black and white. If you ask me to pick up something from the store, and it store charges $10, should you pay me $10.80 (the amount that it costs me to buy it, including sales tax), or is this a second sale requiring a tax on the $10.80?
91

I completely agree with you. As far as I’m concerned, if a CEO has to lay off 1000 employees, he’s doing it so that your grandmother (for the sake of argument) can retire. And a CEO that’s smart enough to know when to lay off 1000 employees is worth his salary/options, just because he’s the captain of a ship that creates so much value for so many people.

92

I don’t think that there are many large, established companies that give their CEOs a majority of the stock. Their stock may be worth a ton of money, but it will still be a small percentage of the market cap.

93

Ryan:


Exactly when did I do THIS??? I was actually trying to appologize for sarcasm dude! Sheesh, forget it.
94

Back to the OP for a few seconds. At least in spirit.

The very nature of economics is a shell game. (That may be true any time money’s involved.)

The federal government has determined that it needs a certain level of funding to sustain those programs that got most of the elected officials their jobs. To accomplish this we have income taxes. Some are levied on the individual, and some on what we call “corporations”.

Less than 10% of federal revenue comes from corporate income tax. More than 70% comes from income/payroll taxes.

Hypothetically, let’s shift the entire burden of supporting 80% of the federal goverment to corporate income tax (i.e. taking a portion of the corporations profits). Immediately profit margins get so small that the corporations aren’t profitable. So we get price increases. Lots of them. The working stiff gets to keep all of his money, but the cost of goods and services is now so high that he spends it all.

Now let’s pretend that the burden is solely on the collective individuals. People have less money to spend, but the cost of goods and services is also comparatively low. Having $100 in my pocket and needing $1 to buy a cup of coffee is equivalent to having $1000 and coffee costing $10.

So how do you want to view $1,000,000? Is it so much money than most people will never be able to earn it, or is it so little money that it isn’t enough to retire on?

As much as I hate paying income taxes, keeping the tax burden with the individual (who is the primary user of the federal expenditures) is my choice.

95
96

Right… like the FBI, the interstates, the U.S. Mint, industry regulations to protect consumers from unsafe products, the EPA, student loans, the military…

My point is that, while there are some true-blue “pork projects”, there are also a number of things that the government pays for that are absolutely essential (or at least very important) to our way of life. To put it simply, the rich have more disposable income to pay for these things than the poor do. If it were up to me, I’d add another bracket up at $2-5 mil. a year to make it easier on poor and middle-class, but increasing taxes on the poor will have the effect of driving up the cost of labor (if you can’t survive by working, why work?), as somebody already mentioned.

The rich can pay more easily. So they pay. It could work better, probably. That’s why I plan on getting into politics. But that sounds like the beginning of another thread…

97

The Ryan: *Here’s somethinmg to think about: suppose a man works at a job and supports his stay-at-home wife (yes, then example is archaic, and perhaps sexist, but it doesn’t work if the couple has equal incomes). *

Don’t worry, we can bring it up to date by assuming it’s the wife who supports her husband. :wink:

The R: *Suppose he makes, say, $60,000 a year after taxes. He shares this money equally with his wife, so $30,000 goes towards his needs and wants, and $30,000 goes towards his wife’s needs and wants. So, why is his wife getting all this money? What is the husband getting in return? Well, she’s doing a bunch of housework, taking care of the kids if they have any, etc. So he’s essentially paying his wife $30,000 a year to do domestic work. Is this income tax[ed]? No. Why not? Because the couple is considered to be one economic unit, and the distribution of the husband’s income is considered to be an internal distribution, and not a “real” economic act. *

Thanks, that gives me a better idea of the “economic unit” concept.

The R: A corporation is also considered a single economic unit, yet the internal distribution of its assets is, for some reason, considered to be a “real” economic act.

Now I confess that I still don’t get why a corporation is considered a single economic unit. I can see why a married couple would have that status: they are strongly connected in many aspects of their life, in many cases permanently, and conduct most of their major economic activities in partnership. (To the best of my understanding, this “economic unit” status also reflects the historical situation where the wife had no independent status as a citizen or property owner. I believe that two brothers, say, living together and sharing one income like a married couple would not automatically be considered an economic unit—is that right?)

But why should this “economic unit” status apply to scores or thousands of shareholders whose connection with corporate activities is limited to owning a few of the corporation’s shares, and can be terminated at the press of a button? I can’t see why their transactions should be considered “internal distribution of assets” in the same way a married couple’s are.

98

**

Because the shareholders ARE the company. Just like the wife is a part of the unit, the shareholders are part of the company. They are the unit.

99

I grasped that they were so defined, Mr. Z. :slight_smile: What I was trying to get at was, what is the point of a category so broadly conceived that it applies equally to married couples and to large groups of shareholders who own (for a few hours, days, or months) a tiny portion of a corporation? Why should couples and corporations fall into the same category and have their financial transactions defined the same way? What is the rationale for suggesting that the tax status of their “internal” asset distributions should be the same? If you don’t know the answer or don’t think I’d understand it, you need not reply, but please don’t simply repeat that it’s because “they’re both economic units”!

100

Kimtsu, it is becasue they are both economic units.

Sorry, I couldn’t resist.

IT doesn’t make any sense, at least to me, to tax money that flows within one entity. Passing money to teh shareholders is not really passing money. Taxing a corporations profits as they flow to shareholders is like taxing your money every time you switch it to a different pocket.

Spouses are no different than shareholders in this sense. It is easier to tax money that actually moves between parties.