Corporate tax vs Personal income tax
If there is going to be tax reform, what is the Democratic vision for it?
Regarding personal income tax brackets and rates, it's pretty clear where most Democrats including me stand. Within our current system, we would prefer a more progressive rate structure.
But corporations? Subchapter S? AMT? Value-addded?
High Hewitt (ugh) had on Paul Ryan (triple ugh) this morning and part of the topic was corporate tax versus personal income tax. Hewitt commented "you're talking to a person but you're also talking to a sub chapter S Corporation". For those who are not aware, the NET income of subchapter S corporation is basically still taxed at the same individual rates, rather than corporate rates, BUT -- this is the key difference -- they are allowed to deduct business expenses which are not generally deductible for individuals.
On the left, we sometimes say "if corporations are people, they should pay taxes at the same rates as people." But beyond the discrepancies in Corporate versus personal income tax rates, the bigger question is "what's deductible?"
If I hire a gardener to cut my grass at my house, I pay taxes on the full amount of MY income (INCLUDING the portion of my income that goes to pay him), and he pays taxes on the full amount of HIS. If a corporation hires a gardener to cut the grass around the facilities, it deducts the full cost of that gardener BEFORE it calculates its taxes. As a person, I can't deduct the cost to cut my grass, fix my computers, repair the roof, or maintain my car, but a corporation can deduct, and does, deduct, all of those things.
On the other hand, if most expenses were not deductible, many businesses would simply not exist. "Margins" --- what's "left over" after paying all expenses -- can be only a couple percent in many businesses, like restaurants. Yet the disconnect between me paying a gardener or basic supplies and a business doing so still seems inappropriate. The barrier for individuals effectively sharing their income with others is high. If individuals deducted the same types of expenses as businesses, the effective individual rates would be decimated--because most people have little to nothing "left over"
Hewitt was discussing Aaron Rodgers (athlete) income as an example. Part of which is a salary (both Hewitt and Ryan believed such income should be taxed at individual rates) but part is royalties or advertising sponsorships (which are probably taxable as business income). They we're debating "how do we make sure that people like Aaron Rodgers still pay the higher individual rates while still lowering corporate rates for people who have businesses?"
I found the question indicative of the pro-business anti-human mindset of Republican tax policies. But the truth is that 1) these are difficult questions 2) republicans frame them better with quaint "family farm" stories and warnings of uncompetitive positions relative to other countries and 3) educating and framing the issue of deductibility as well as total (effective) tax rates would be beneficial to political discourse because the uninformed public is being sold a bill of goods by the overlords.
So what should the democratic vision be for tax structure?
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