First, I am not a tea party, anti-tax sort. What would happen to tax revenue if we eliminated corporate taxes? At some point the money saved in taxes would be paid to individuals through income, disbursements, dividends, and/or capital gains . Many of those individuals have a higher marginal tax rate than the corporation. Could it end up being a wash, or even an increase, in Federal tax revenue (in the long term)?
Some of the problems I see is that it allows the owners/stock holders to “hide” income within the corporation, but eventually it has to be disbursed somehow.
Does it? Can’t it just sit as “operating funds” indefinitely, where if a non-incorporated person made that money, he’d pay tax on his profits the year he made them?
I don’t know that any distinct corporate tax rate can fail to be a tax shelter, unless corporations pay a higher tax rate than individuals. Ideally, I’d like to see all corporate profits added to the CEO’s taxable income & taxed as part of same, since he’s the one who controls its movement.
Corporations don’t pay taxes. Only customers pay taxes. Raise the corp tax and it is passed on to consumers. Cut the tax and government taxes consumers. Same result.
It could, but why would a company want to do that?
Companies always want some money for lean times, but beyondf a certain point it’s effectively wasted; companies also want to invest in capital, training, process improvements, expansion, and other stuff. And in any case, money put in a bank isn’t put into a big mattress - it’s invested.
I’m not sure that’s correct. If a corporation is taxed on net profits (which I think is how it usually works) then if it raises consumer prices enough to make up for the tax increase it ends up increasing it’s net profits which means that it’s taxes go up even further. It doesn’t seem like a corporation could, even in principal, completely pass increased income taxes onto consumers.
This assumes, of course, that their accounting is honest but that’s a whole different discussion and it’s going to be hard to convince me that the prevalence of shady accounting practices is a reason not to tax corporations.
As I understand it, the principle in post #5 is a failure to understand extremely simple maths.
If I get your reasoning, you’re saying that if you introduced a 30% tax on a company with a profit of $100,000 (reducing the company’s share from $100,000 to $70,000), the company can’t just increase their before tax profit margin by 30% to compensate (since they’d have to pay another $9,000 tax on the additional $30,000). Is this correct?
The reason this is wrong is because the company can take this into account, and aim a little higher, for a 30% + 9% + 2.7%… increase. Eventually this will come out to 142.86% of the desired after-tax profit, or 100% / 70%.
http://www.alternet.org/economy/94985/the_great_corporate_tax_heist/ Our effective rate of corporate taxes in among the lowest in the world. 28 % of corporations that are bigger than 250 million ,pay no tax at all. our corporations kick in very little . During Eisenhowers time corps paid 50 percent of the tax money collected . Now while they get bigger and richer they escape paying their share. They pay a sliver and the rest falls on us.
The tax is on net profit, not gross income. If anything a higher tax could spur reinvestment into expansion of business instead of increasing dividends, etc.
And you dredge up left-wing cites who misuse analysis in its most simple form to try and prove a point. Just like your cite that indicated that the Bush tax cuts favored the wealthy by providing a cite that showed how the wealthy ‘saved’ more $$ after the tax changes than the poor…which was the only mathematical result possible, since the poor weren’t paying any taxes to begin with.
The cite you reference talks about actual dollars collected as a % of GDP. That is not the same thing as corporate tax rates. In fact, one can influence the other and it most surely does. Arthur Laffer has spent a lifetime explaining this influence for personal income tax rates. What do you think would happen if we raised corporate tax rates to 90%? Would we just sit back and collect more money? You don’t think any incentives would be changed by that policy? Sheesh.
Here’s another cite from the CBO that uses the same facts, but provides different conclusions
Take a look at page 22. The US marginal rates are among the highest in the world. In addition, the US has some of the most bizarre, distortionary laws on the books regarding income earned in foreign countries. The net effect of which is to actually discourage job growth and investment in the US, by creating dis-incentives to repatriate the income (because then it would be taxed at a punitive rate).
I’m dealing with a situation at work right now that involves this issue, where our shareholders would rather build a plant in Eastern Europe then build one in the US, because we have earned money over there that would have to be taxed if we repatriated it. It’s a shame, but hey…don’t blame us. We’re just making a sensible business decision. Blame your Socialists-In-Office. The same is true for many US multinationals like Coke, P&G and others. Go look and see how much of their profits are earned from overseas, and put yourself in their shoes and decide what you would do if you could (1) invest it overseas at lower tax rates or (2) repatriate it and pay punitive rates.
The overall flavor of the CBO report is to say that once you add up all the +'s and -'s of US corporate tax policy, on the whole it’s probably about the same as most other G7 countries.
That may be correct. But that doesn’t mean there aren’t opportunities to
Create jobs and investment incentives right now by changing corporate tax policy
Actually raise more revenue, via the corporate ‘Laffer effect’ by lowering and simplifying corporate tax rates.
Well that link makes me want to eliminate corporate taxes altogether. Our nominal rates are high. but companies with deep pockets can get tax breaks to lower the actual rates. Doesn’t seem like a good plan to me, as it hurts those businesses that can not employ lobbyists. Also, the article does not take into account that money not paid by the corporation will be paid (eventually) to someone else who presumably has a higher marginal rate.
This is backwards. Company tax is paid on profit before it is available for reinvestment. Increasing company tax would decrease the amount of money available for reinvestment, even if you don’t adjust the tax rate on dividends to maintain the total (company tax + dividend tax) rate.
No, the failure in your post #8 is a failure to understand Al Bundy’s simple post #3 and my simple post #5.
Al Bundy stated that corporations don’t pay ANY taxes, they merely pass them all onto consumers. In my post I showed why corporations can’t pass ALL of their income tax onto consumers. I did not state that they couldn’t maintain or even increase their after tax profits. I showed that they would always pay some taxes above and beyond the amount they increase their prices.
And the prices they charge are not solely determined by their costs (including taxes). Free market competition would still be at work.
I know what the curve is, but there is no evidence that we are on the part of it where there is an increase in revenue from lowering tax rates. Remember that half of the Laffer curve shows an increase in revenue when tax rates are raised.
But if you agree that 100% tax rates will generate zero revenue, that means that revenue must go down to zero if rates keep being raised past some optimum point.
You did not show it, you made the claim without any supporting evidence and without accurately describing your claim in the first place.
So here’s your chance: show that your claim is true. Give a worked example that proves your point. But I am going to be very disappointed if it’s the same line of reasoning I just disproved and you’re simply incapable of realising it.
Here is a non slanted article that will counter your slanted right wing philosophy.
You are playing with a variation of “marginal propensity to consume”. I hope he never answers.