The 1 Chart That Reveals Just How Grossly Unfair The U.S. Tax System Has Become

[applegrove]

The 1 Chart That Reveals Just How Grossly Unfair The U.S. Tax System Has Become

by Mark Gongloff at the Huffington Post

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"SNIP.....................

Notice the beige stripe that is shrinking steadily? That stripe is the percentage corporate taxes contribute to total federal revenue. And notice the olive-green stripe that has swollen to be larger than the beige stripe used to be? That is the contribution of payroll taxes to federal revenue.

What this shows is how dramatically corporate tax contributions have shrunk in the past several decades, and how our personal taxes have risen to fill the gap. Payroll taxes now make up 35 percent of all federal government tax receipts, up from 11 percent in 1950. Corporate income taxes, meanwhile, now make up less than 10 percent of federal revenue, down from about 26 percent in 1950.

To 'splain those numbers a little more clearly: We who are on the payrolls of companies now bear way more of a tax burden than those companies bore decades ago. Those companies, meanwhile, bear less of a burden than we ever did.

And this doesn't include individual income tax, which accounts for about 46 percent of total federal tax receipts, roughly the same as 60 years ago. Between income tax and payroll taxes, individual Americans are responsible for about 81 percent of all federal tax receipts, up from about 51 percent in 1950.

....................SNIP"

[Octafish]

1. Shows how the rich keep getting richer...

...the poor, poorer. Reaganomics is Reverse Robin Hood. Why it is still default economic policy for both parties makes me think our democracy is corrupted.

[Initech]

10. The biggest mistake we ever made in this country...

Was electing and trusting Ronald Reagan. He and his criminal friends got drunk with power and we're going to be paying for it several hundred years later.

[Celldweller]

2. what to do with corporate taxation?

Ask any small business person. If you have a corporation, your goal at the end of the year is to show 0 profit or even a loss.

For example:

Lisa's Flower Shop

750,000 revenue

200,000 cost of goods

100,000 lease, infrastructure

50,000 misc.

Lisa's salary 100,000

Salary of 9 employees: 300,000


So Lisa's company made ZERO money in profits that year. She paid taxes on her personal earnings and her and employees ss.

Should Lisa pay more than her own personal income tax on $100k?

[Vincardog]

3. Does your example hold up for EXON, GM, Bank of America, the Koch Bros businesses? Your example see

to be a little of a red herring

[Celldweller]

4. agreed

I'm definitely NO EXPERT here!!!

So plz be gentle lol.

exxon has 4.5 billion shares. that means that there are 4.5 billion little tickets signifying a 1/4.5 billion stake of ownership.

so... each little ticket is now worth around $91

So when it's time to tax people and/or businesses, who pays it?

if exxon pays a tax on profit, that amount is taken from 4.5 billion little tickets. Because the 4.5 billion little tickets represent the ownership of the company.

If I hold 1 share of exxon that was worth 80$ in 2012 and now its worth 90$ then I have made $10 profit. I should pay taxes on that money. It's income, right?

so if we taxed exxon at 50% for last year and they paid 8 billion dollars in taxes, is it fair to say that the company would have been worth 8 billion dollars LESS than it was? Does it stand to reason that the market cap would have been 8 billion dollars LESS?

so...and remember I'm sooooo uneducated on this...

corporate taxes reduce the value of a business and thus reduces the value of the owners stake?

this brings me back to my pet peeve. Why aren't capital gains taxed at normal income rates? 35%-ish?

[Vincardog]

7. If you own a stock you make nothing except dividends until you sell the stock. I don't know

what you are trying to show with your examples. TAXES are the price we pay to liv in a civilized society. Corporations rely on the court systems and the military, they do not pay for either of these services. Corporations benefit from our infrastructure, educated workers and access to our markets. If they are not willing to contribute to our society they should now want to benefit from it.

[Celldweller]

8. im sorry I was very unclear

if corporations pay taxes, where does that money come from?

I believe, and I could be wrong... that money comes from the owners right?

the #1 holder of exxon stock is vanguard mutual funds (200 million+ shares)

That means retired people and municipal retirement folks and middle aged investors.

I guess my point is... you take from Exxon, you're taking from its investors which means it takes from many of us.

A corporation is not a person, can't walk and talk... doesn't like dogs lol. A corporation is a pool of investors/shareholders.

capital gains is REAL income. Tax capital gains like normal income and budget problems done.



Now I do agree with you about infrastructure. Some corporations cost their home city a lot of money. Roads are built, etc... but that's a local thing.

[Mosby]

18. your assuming corps distribute all their profits to stockholders

They don't, like apple they hide the billions offshore, until they turn them into executive option packages etc.

[Celldweller]

19. thats the way the law is written

That's like yelling at cars on the freeway for going 65mph in a 65mph zone because you feel that 55mph is safer and better for fuel consumption.

[The Straight Story]

21. And I think that is the point - people want the law changed

We get that it is not illegal. And if there is one thing we have learned about corporations is it that they don't have morals (which is why they dump pollution into rivers, etc and so on).

Give them an inch they take a mile. They exploit loopholes so we should close them.

[Celldweller]

23. I'll buy that.

I agree with tax policy that reduces taxation IF that profit is funneled to shareholders (where they should be taxed as regular income) and allow write-off when they buy cars, trucks, equipment etc. All of those things benefit many more people. But when Apple stockpiles CASH because they don't know what to do with it... yeh change some laws.

[blackspade]

20. One of the problems with share dividends:

Corporate managers determine how much of the company profit goes to shareholders and to anything else (like their own pockets).
So taking a cut of Exxon's profits does not have a direct impact on shareholders.
It is a myth that the billions in profit gets distributed to shareholders.

[Celldweller]

24. it's not just about dividends.

The value of the stock is the main source of profit from shares of a company. Buy shares at 50, Sell at 70 and 10,000 shares nets $200,000... why the hell isn't that taxed as normal income????

[former9thward]

31. Then you would agree that losses should be taken off of income.

Right??? To be consistent. Capital losses are limited as a deduction. The reason we have a capital gains rate is because of risk. There is no risk with ordinary income.

[JDPriestly]

42. Nowadays there is a huge risk with ordinary income.

Talk to the teachers who spent years in school getting advanced degrees and years in the classroom acquiring experience and then got laid off. That goes for nearly every profession that takes a lot of training or in which experience means superior skill. These working people took a personal risk, investing their time and money in developing skills and knowledge -- and lost it all. It is particularly painful when people have to start over in their 50s and 60s in a bad economy.

Talk about risk. In today's economy, every job, every profession, every life imposes risks just as great as those involved in capital gains -- maybe more.

Student loans are an investment, and the return is no longer guaranteed. It might have been in the past, but it is not today.

So I disagree with your statement, "There is no risk with ordinary income."

[A Simple Game]

33. Don't quote me but I think capital gains were taxed at a lower rate because

it was felt to tax at the normal rate would be the same as double taxation. This was set up when corporations paid a fair share of taxes, so the theory was that share holders had already paid some taxes through the corporation.

[Vincardog]

22. The RICH own 80% of the stocks traded. The canard that taking money from the corporations is

Stealing money from retirees is a worn out joke. Where is the concern for the Billions stolen from the Public by the Banksters?

[Celldweller]

28. I don't like to admit it...

but when I was younger and less financially responsible...

I had a year where I paid $2000 in overdraft/return fees to BofA.

Irresponsible yes but $2000 for their computer system to grind some bytes? It's not like the checks are sorted and cashed by hand.

[pa28]

9. Yeah, I think you hit on the root of the problem with your last point.

For corporations, large or small, the "problem" is disposing of excess value at the end of the year in order to avoid taxation.

Instead of reinvesting in the company our current structure creates an incentive to hand out massive, lightly taxed dividend payments and executive compensation packages designed to take advantage of low dividend rates.

Sometimes companies like Apple wind up with more cash than they can dispose of without blowing out precedents regarding pay and bonus. Then they resort to exotic tax loopholes.

Tax capital gains like normal income and the problem is already on the way to being fixed.

[okaawhatever]

15. One of the issues with taxing cap gains is that we're only collecting money from Americans. Many

of these stock shares are owned by people overseas. Why whould we let them share in the profit of a corp without paying any tax on it.

[Celldweller]

25. damn good point...

Find a way to tax foreigners profiting from US companies.

[dkf]

27. Short gains are taxed at ordinary income rates.

But what if you bought your stocks years ago and it's not grown in real value but is in line with inflation. What tax rate do you pay on a gain that is only inflation? Maybe you didn't even keep up with inflation but you still have to pay a 35% gain?

[JDPriestly]

41. Taxing the corporation encourages it to spend more.

It is more likely to hire employees, expand and pay more to its employees.

The problem is not small corporations with low turnover.

The problem is very large international corporations that pay huge salaries, bonuses and stock options to their overpaid CEOs. Those are the companies that should be paying a higher proportion of their profits in taxes.

If our taxes were truly progressive, and if all income was taxed progressively, then the CEOs of the large corporations and the major shareholders in large corporations would pay taxes proportionate to their share of the wealth in the country.

The flower shop example is misleading because the profits of the flower shop would be taxed progressively and therefore fairly. Corporate tax rates should be only slightly higher than personal tax rates (to encourage re-investment of corporate profits and jobs, jobs, jobs and new product development) and yes, capital gains should be taxed at normal income rates or at least at a graduated rate depending on how long the asset has been held.

[Sherman A1]

11. What type of corporation is Lisa's Flower Shop?

That makes a huge difference.

[Frustratedlady]

26. But, I thought you couldn't show a loss or zero for more than a couple years in a row.

They wouldn't let me in my MOM/POP business.

[LiberalAndProud]

32. Most likely, Lisa's company is taxed.

Earnings from an S-Corporation are distributed to the owners, and the owners pay individual income tax on any profit, even if the profit is left in the company. That was my experience as a small business owner.

[n2doc]

5. But, But...35%!!! The US has the highest corporate tax rate in the Universe!

Rand Paul wouldn't be lying to us, now would he? Corporations must be making less money than ever! That's why the stock market is so bad. Oh, wait....

[Mr.Bill]

12. I would like to ask Rand Paul

to list all the corporations who wrote the IRS a check for 35% of their profits last year.

[Blue_Tires]

29. +1

[Bolo Boffin]

36. +1. n/t

[HiPointDem]

6. +1

[AAO]

13. I'm game to defend our rights,

[ErikJ]

14. Looks like payroll taxes has replaced corporate taxes.

[Gore1FL]

16. Does the payroll tax category include the payroll taxes paid for by corporations?

If so, then the article is misleading in its assessments.

[Egalitarian Thug]

17. Having no rear-view mirror has consequences, just like refusing to enforce the law. K&R

[alc]

30. corporate taxes are a fee for services to large companies

They need "incorporation services" to do business around the world. This includes a government that vouches for them, courts to settle disputes enforce patents and so on, a banking system and various other functions. Most big businesses are dozens or hundreds of separate legal entities (e.g. corporations). They place their business functions in the locations that provide the best after-tax profit just like they place their factories in the places that provide the cheapest manufacturing costs (considering other factors in both cases).

Countries all over the world are competing to be the provider of those services. Businesses look at the ones that provide the services the most care about access to other countries markets, stable banking, laws they prefer. After that, they go for the low cost provider. Other countries want to be the service provider and don't want the US taxing their corporations (they aren't US corporations making the profit). And the corporations don't want to pay extra billions. So there's no easy answer even though it looks like an obvious solution (e.g. tax the us company - but it is nothing but a stockholder in the foreign company the US would be taxing wealth - the stock value -, not profit even though you and I can easily see they are making a profit.)

Competition for these services is even more important in buyouts/mergers of international companies. If the location means a difference in $billions/year of taxes, you can bet where they will put the headquarters. It's a "safe" time to just up and move all operations.

[truebluegreen]

34. This is why they are gunning for Social Security

and want to reduce payouts....

[blkmusclmachine]

35. Why begrudge ... the savvy businessmen ?!?!

[YeahSureRight]

37. Just remember to thank those that voted for Ronald Reagan for it is they who

Last edited Fri May 24, 2013, 06:34 AM - Edit history (1)

have given us the tax structure and economy we have today.

The sad sick part is the number of "Democrats" who voted for RR not once but twice.

Go on and keep voting for Pubs and Corporate/Blue Dog/3rd Way Dems and it will only get worse.

[CdnExtraNational]

38. Corporatism, Corporations Are Better Than People

In my opinion corporations shouldn't have more rights than people... but they do.

- Corporations can cross borders, to hire the cheapest labor force, whereas people require visas, making the citizens of the poorest countries prisoners
- Corporations don't have to pay taxes on their worldwide income, citizens do.
- Corporations are free to secretly buy governments and regulatory agencies.
- Corporations can demand incentives in almost any jurisdiction for setting up business there.
- Corporations can shuffle their money around in order to pay the lowest taxes possible
- Corporations can borrow money at extremely low interest rates
- Corporations can carry their losses forward
- Corporations can issue stock
- Corporations can hire expensive lawyers and accountants
- Corporations can't go to jail

And the list goes on and on.

The obvious lie about the lower taxes = job growth, is that if the corporations were forced to pay higher taxes, they would reinvest more of their profits into hiring people and setting up new divisions. When you hire people that becomes a deduction on your taxes.

By having low corporate tax rates the cost to hire someone is actually higher than just paying taxes on the income. But instead they are essentially forced to sit on their cash to maximize shareholder value.

[Javaman]

39. So in other words...

we pay more while they pay less.

[DallasNE]

40. Don't Overlook The Excise Tax

That category includes things like tariffs, taxes on fuel, alcohol and tobacco. I believe at one time it included valuables such as gems too. A lot of this decrease is probably tariffs negotiated in trade agreements.