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on Nov 30, 2012
I remember being in college (back in the 70's), living on my own, working full time, and also was heavily involved in the rental real-estate world. I was 23, and trying to manage 5 houses (and house payments!!), when 3 of my rentals became vacant at the same time!I had to quit school (at the time I was a senior at Cal State Hayward), and get a second job in order to keep the mortgage payments current. For 3 months I was living on top-ramen noodles, I think,...lol.
Sadly, I never went back and got my degree: but all's is well when I think back. Financially, I'm pretty well set now (thank goodness to the California Real Estate boom!)...but those were dark days indeed for me!
I'm sitting on a fiscal cliff right now... trying to start a company in a bum economy, being taxed at the highest income bracket while trying to raise my two small boys (3 & 5), and an unemployed husband breaking his back to find another job. What a wonderful life!
In my perfect world, the government would step back and people could be individuals with the freedom to make their own decisions without fear of further harassment from government laws, taxation, threats of imprisonment, and other nonsense mandates. I believe people are good and we can do a better job as individuals than in the overpowering government reign. We are getting taxed at 55% which now means we're working to pay the government - over half of my potential earnings is going to fund the bureaucracy that is restricting my very freedoms.
In my perfect world, everyone would have the freedom to start their own company. In Israel, whether your company is successful or fails you are respected just by taking the initiative of trying to do it yourself. Failure is considered an opportunity for learning and wisdom gained from your experiences. We need to embrace education and reform our school "system." I know I can do a better job! And I believe private industry can too! Long live capitalism, the Constitution, and the value of our individuality. May God bless America... I will wrap my children in my love as we brace for what's in store for our future as we continue down this losing path of large government, excessive wasteful spending, additional restricting laws, and unaccountability... BTW - what comes after a trillion?
Concerned citizen: There is no way to achieve a 55% tax rate on your total income. The fact that you claim to be getting taxed at that rate (with an unemployed husband and you sitting on a "fiscal cliff") just demonstrates the ludicrous fantasyland some people manage to conjure up to portray themselves as "victims."
And you might want to rethink the utopia of a world with no more governmental "threats" of imprisonment. That's basically what they have in Somalia right now - you could move there today!
Thanks you "Huh?", because I was about to call serious b()ll$#!+ on this post too, but you beat me to it.
If this person has the income to even be taxed in total withholdings at 45%, then she must still have a very sizable income before her start-up. Wish my wife had a job like that so I could sit around eating doritos all day.
To Huh? and Derek. Try adding up everything you pay for Federal Income Tax, State Income Tax, FICA, Medicare, Sales Tax, Property Tax, Excise Tax and... See if that total does not add up to over 50% of your income.
I rarely agree with Huh? and Derek, but it's hard to see how a struggling business pays 55% tax.
But a person could easily pay around 50% tax on their wages.
I do. All my wages are taxed at the 35% federal rate, as I have other non-wage income that pushes my wages into the 35% tax bracket. I also pay AMT, which is about 4.5% of my taxable wages. Social Security and Medicare tax adds another 3%. Then there's 9.3% California income tax. Add that all up and it's around 50%.
And next year taxes are going up.
How much can the government take before it's called slavery?
My wife doesn't work anymore, but if she did, every dollar she earned would be subject to that 50% rate. If she got a job at McDonalds and earned a dollar, she'd get to keep 50 cents.
She thought about starting her own business, but it doesn't make sense. Not at those tax rates.
We also pay over $15,000 a year in property tax on our house. And we pay about $7,000 a year in sales tax.
Alternate Reality strikes again:
"[M]ost Americans in 2010 paid far less in total taxes â€" federal, state and local â€" than they would have paid 30 years ago. According to an analysis by The New York Times, the combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980.
Households earning more than $200,000 benefited from the largest percentage declines in total taxation as a share of income. Middle-income households benefited, too. More than 85 percent of households with earnings above $25,000 paid less in total taxes than comparable households in 1980.
Lower-income households, however, saved little or nothing. Many pay no federal income taxes, but they do pay a range of other levies, like federal payroll taxes, state sales taxes and local property taxes. Only about half of taxpaying households with incomes below $25,000 paid less in 2010.
The uneven decline is a result of two trends. Congress cut federal taxation at every income level over the last 30 years. State and local taxes, meanwhile, increased for most Americans. Those taxes generally take a larger share of income from those who make less, so the increases offset more and more of the federal savings at lower levels of income...."
Article: Web Link
Charts: Web Link
Data: Web Link
Citizen P is right that taxes are lower today than they were in 1980, when Carter was President. You remember what the economy was like back then, right?
Here's another quote from page 2 of the NY Times article Citizen P cites:
A household making $350,000 in 2010, roughly the cutoff for the top 1 percent, on average paid 42.1 percent of its income in taxes, compared with 49 percent for a household with the same inflation-adjusted income in 1980 a savings of about $24,100.
The 42.1% rate cited by the NY Times includes people who live in low tax states, including many states that have a 0% income tax rate (California's is 9.3%). It also includes investment income currently taxed at only 15% at the federal level.
My comments above focus solely on the 50% taxes on my paycheck. Obama wants to raise taxes on my wages by almost 5%. Why isn't 50% enough? How much more must you take before you're satisfied?
@spcwt: regarding your gratuitous reference to Mr. Carter (as if his very name might evoke a chuckle from the knuckleheads), perhaps you don't remember the economy of 1980. That was at the end of a 35-year period of relatively high taxation -- higher early-on than later, and always much higher than now. That was also a period of unprecedented expansion of the American economy, and a time when the middle class flourished and living standards improved dramatically, across the board in the US.
It was also about the date that marked the beginning of the decline in the fortunes of the middle class, which is barely better-off now than it was then. Now, I am not blaming tax cuts for the decline of the middle class, but I AM saying that if lower taxes really did stimulate growth and good jobs in the US economy, then the recent 32 years of sour experience under such conditions would have presented evidence of it.
Instead, they have borne witness to unprecedented growth of income inequality in this country -- the development of a fabulously wealthy few, and the many below whose fortunes have stagnated, at best. This real-life discrediting of the table crumbs theory of economic policy was documented in a CBO report that the Congressional Republicans squelched before the elections. A rising tide has lifted all yachts, but it sinks the row boats.
Your gripe is also miss-placed, as the article clearly states. For federal taxes have actually been cut Too Much, while more regressive state and local taxes have grown substantially since 1980. So it's not the total burden, but the make-up of the burden that might concern you.
And your "how much is enough" Q can't be properly directed at Mr. Obama, who is simply fixing the over-cut. He's a convenient target, but all those local pols are much more to blame for your "plight."
I agree that states and localities sometimes spend badly -- I think of it every time I see Diablo Road getting what seems like its annual re-paving. But it takes actual hard work and citizen involvement to make change at the local level -- and it's so much more fun to just sit back and fulminate at the feds, right?
spcwt: "But a person could easily pay around 50% tax on their wages.
I do. All my wages are taxed at the 35% federal rate, as I have other non-wage income that pushes my wages into the 35% tax bracket. I also pay AMT, which is about 4.5% of my taxable wages. Social Security and Medicare tax adds another 3%. Then there's 9.3% California income tax. Add that all up and it's around 50%."
This is the kind of slippery "math" that is trotted out to "prove" things that are actually untrue. To begin with, spcwt is starting his/her analysis at the point where he/she has already taken home at least $375,000 of unearned income on which he/she paid a blended tax rate of less than 28%. (How much less depends on the nature of his/her income. If it's capital gains and/or dividends, the rate was far, far less.) If you look at wages as your "base" income (as most people do) you would look at it the other way around - and consider the top-tier tax rates as being imposed on specwt's $400,000+ of unearned income. Social security tax is capped at $110K of income, so as a percentage of spcwt's half-million+ annual income it's a shrinking portion of overall taxes.
If you net over $300,000 after taxes ("take home" to a house which apparently cost over $1.5MM)and most of your income isn't wages - don't expect me to join your pity party over how you're really a "slave."
From a self-professed tax lawyer, that could not have been an accident. It certainly weakeds the argument to learn that it was arrived-at dishonestly.
Ok, let's look at wage income only.
A single wage earner with no other income can still pay around 42% tax on their wages. And next year, that should rise to almost 50% (assuming Bush tax cuts expire).
And if both spouses work, the other working spouse can easily pay more than 50% tax on their wages.
Here's the rough math for a single worker with wage income only: $375,000 taxable income results in total fed & state tax of $160,000: $100,000 federal income tax + $15,000 AMT + $35,000 CA income tax + $10,000 Social Security & Medicare. $160,000 / $375,000 = 42%.
If both spouses work, that spouse's wages can be taxed at over 50%, as they would be taxed at 35% federal income tax and 9.3% CA income tax. So if she makes $100,000 she'd pay a 53% tax rate on those wages: $35,000 federal income tax + $4,000 AMT + $9,000 CA income tax + $5,000 Social Security & Medicare. $53,000 / $100,000 = 53%.
These are rough calculations, of course. Every taxpayer's situation is unique and the tax rate will depend on whether they have kids, have a mortgage, make charitable deductions, qualify for various credits, etc.
I'm not asking for a pity party. I'm just explaining why I oppose additional tax increases on high wage income. If you tax wages too much, certain people make the choice to stop working. For example, my spouse.
I do agree the government needs additional tax revenue. I just think there are smarter ways to raise tax revenue than trying to take it directly from people's wallets. A carbon tax comes to mind.
Concerned Citizen may have been calculating her total taxes, not just wage tax, but even so she may not be taking into account how sizable her federal refund is. If she is operating her start-up at a loss and does not see a substantial refund, it's probably time to find a new CPA. I smell a new client spcwt!
We pay almost exactly a grand a month in property tax, but with my self employment we also get refunds ranging from large to ridiculous - not that I'm complaining - most years. In fact, I pay almost no state or federal tax when I have a weak year, as will be the case for 2012.
I too have issues with how my tax is spent, though I am quite certain those objections (the black hole known as homeland security for starters) are very different from the right-leaners on this board.
Complaints or not, considering the beautiful area we reside, the extraneous pleasures we can afford, and how little wifey & I pay compared to most non-U.S. citizens of our income level, I can hardly gripe.
That's a complaint I have about taxing wage income and business income at the same rate.
It is relatively easy to use "business expenses" to reduce your business income. It is nearly impossible to shelter your wages from tax, however.
For example, a husband and wife with business property in Hawaii can travel there annually to check in on it and to review additional business opportunities there. They can claim a large portion of their travel expenses as tax deductions. This includes hotel, meals, rental car, etc.
A person with wage income only cannot deduct such travel expenses. So even though they may have similar amounts of income, they are taxed differently.
Another problem with the tax code is it treats all Americans the same, whether they live in a high cost area, like the Bay Area, or in a low cost area. It costs a lot to live here, and you must pay for personal expenses with after-tax dollars. This means a Californian must earn more (and pay more taxes) to have a similar lifestyle to someone living in a lower-cost state.
For example, a typical family sized house in Danville is $1 million and therefore costs about $5,000 a month (mortgage + property taxes), or $60,000 per year. If 50% of your paycheck goes to taxes, then $90,000 of your paycheck goes to pay for your house. In other words, you have to pay $30,000 of income tax in order to get the money to pay $60,000 per year for your house.
If you live in a low cost area, however, where a typical family sized house is $300,000, it costs about $1,600 a month, or around $20,000 per year. If 50% of your paycheck goes to taxes, then $30,000 of your paycheck goes to pay for your house. In other words, you have to pay $10,000 of income tax in order to get the money to pay $20,000 per year for your house.
So, you have two identical taxpayers earning the same amount of money, living in the same type of house, but the Californian must pay $20,000 more of wage taxes than the other guy to get same house.
This is unfair because taxpayers in similar financial circumstances should pay similar rates of tax.
If you want to talk about "fairness" I'd start with the fact that passive income is taxed at rates below earned income. Self-employed people are more aware than employees that FICA is actually a net of about 13% (higher than spcwt posited) on their first $110,000 of income in addition to income tax, while dividends and capital gains are taxed at a reduced rate than the income tax on wages. That's why Warren Buffet's secretary takes home less of her income than he does, and why Mitt Romney had to blow off over a million dollars in deductions he was entitled to take in order to get his taxes **up** to a "respectable" 14%.
spcwt, there are lots of spouses of people who make over $400,000 a year who don't have jobs. If your spouse has convinced you that the reason he/she doesn't get a job is the tax rate, congratulations to him/her for getting you to believe that whopper!
A Californian can pay close to 50% income tax on investment income. Investment income is taxed at 15% at the federal level, California taxes it at 9.3% and it has typically already suffered a corporate level tax. For example, the average effective tax rate of S&P 500 companies is 26%. All those taxes together add up to around 50%. And next year, taxes on investment income will rise by the 3.8% Obamacare surtax and much more if Bush tax cuts expire.
I agree FICA is 13% when including the employer's tax cost of an employee. I didn't include the employer's FICA portion when I said my wages are taxed at 50%. This further strengthens my argument that high wage individuals are taxed too much.
Tax is only one aspect of choosing whether both spouses work, of course. There are many other factors at play, including impact on kids, commute costs, reduced personal time, strain on family, etc.
"California taxes it at 9.3% and it has typically already suffered a corporate level tax. For example, the average effective tax rate of S&P 500 companies is 26%. All those taxes together add up to around 50%."
Whoa! Basic conceptual and arithmetic errors here. First, whatever taxes a corporation pays on its operations isn't paid by the shareholders. You don't pay any taxes on any undistributed profits made by the corporation. You buy the stock for $X, you get $X dividends (and pay tax at a cut-rate level on them) and sell for $X (and pay tax at a cut-rate level on your gain.) All of those factors are completely independent of any corporate taxes, which are already factored into the price you bought the stock at. You don't get "credit" for the taxes paid by companies whose stock you own any more than you get "credit" for the taxes paid by a bank you have a savings account at. That argument is a shell game.
Next, your math skills are a bad as your conceptual ones. Even if you could rationally credit the corporate tax to the shareholders, that would mean that the individual is paying income tax on 74% of the corporation's profit, not 100%. You don't just add all those numbers up.
"I agree FICA is 13% when including the employer's tax cost of an employee. I didn't include the employer's FICA portion when I said my wages are taxed at 50%. This further strengthens my argument that high wage individuals are taxed too much." Most of FICA is capped at $110,000 of income. With typical deductions and exclusions the average tax rate on income below $110,000 is about 20%. So the additional income tax on earned income above that level is offset by the FICA tax which is no longer deducted. (Of course, there are no deductions or exclusions for FICA calculations.)
The total tax burden on all sectors of society has been analyzed, and is remarkable level. It's true, that a two income family with both spouses making about $100K will get hit harder than most other categories (with either higher or lower income), but the actual disparity in tax burden (including all taxes, direct and indirect) is remarkably small. We've managed to end up with something that's very close to a "flat tax" in result, if not in design.
I understand that everybody wants to feel sorry for themselves, and enjoys the conceit that they're giving more than others who are less deserving. But if you're living in a $1MM+ house and have a mid-six figure income, you're not a slave and you're not a victim, even if you "only" take home $300 - $400K after taxes.
Corporate taxes are borne by the shareholders, just like any other cost. It affects the PE ratio and therefore reduces the stock price. It also reduces the amount of profits that can be distributed as a dividend.
A shareholder bears the burden of the corporate tax in the same way a parent bears the cost of their child's expenses. You could try and argue that the child pays its own expenses with its allowance, but we all know it is the parent that ultimately pays the allowance.
It is not the same as bank interest. A bank pays you interest for the use of the money you deposit in the bank. The interest represents the time value of money, not a share of bank profits.
The tax burden is not remarkably level. You obviously did not read the NY Times article that Citizen Paine posted above.
Debating the tax rates and who pays what amount is pointless. Right now the way things are headed, California will contine to have less jobs and less opportunity. I don't see how the economy will improve with higher taxes and entitlements growing or staying the same. If the Dems want to raise taxes, they need to give up some of their entitlements so that "they are spreading the wealth around" too. They say there should be "fairness" but increasing taxes on those already paying the highest percentage of the taxes is not fair. The middle class is not getting their taxes raised. But they will be the losers in the long run when prices go up and jobs are not created. Sounds like France, Greece, Italy and Spain all over again.
There is nothing unfair about asking those who have benefitted the most during recent years to pay some of that additional benefit in taxes. The upper 10% have raked in 93% of the growth in income over the past four years. They/we can afford a small return to Clinton-era tax rates better than anyone else.
Tax rates wouldn't just go back where they were under Clinton, of course, due to the new 3.8% tax on investments, .9% tax on wages and other taxes imposed by Obamacare.
I think most people would not want the government to take 50% of their paycheck. If you allow them to do it to the rich, then someday they'll do it to everyone.
spcwt is correct; total tax rates on the wealthy wouldn't go back to where they were under President Clinton.
They would be LOWER.
Capital Gains under Clinton were taxed at 28% or 20%, depending on the year. And even after the rate was lowered to 20%, Clinton had a budget SURPLUS.
The current capital gains tax rate is 15% for everyone.
A lot has changed in the past 20 years since Clinton became president. Most notably, Europe and our other business competitors have dramatically reduced the tax burden on capital gains.
Look at page 14, third paragraph of this study by Ernst & Young, which says in 2013, "The top integrated long-term capital gains tax rate will rise from 50.8% to 56.7%, the second highest among OECD and BRIC countries."
We can't wish globalization away or pretend it's still 1992. The investment world has changed.
The U.S. will struggle to compete globally where it continues to tax capital gains at a rate that is second highest among OECD and BRIC countries.
And yes there are those that benefited that is true, but what is left out of this commentary is that those who benefited- about 10% of the population- pay 70% of the tax burden. So, yes they make more money but they also pay a bigger percentage of the taxes. We do have a progressive income tax- the more you make the more you get taxed. I guess no one wants to admit that. Why do you think so many small businesses and large businesses (Hostess and Campbell Soups) to name a few are closing? Not because they are happy with their taxes or the prospect of higher taxes. So bring it on and more middle class will be out of work.
People-get an ITIN-individual tax ID number and claim all kinds of non-existing relatives-this gov will give you $1000 per kid. No proof needed. IRS knows of this and does NoTHING. Friends of mine get $10000-15000 every year. Either u pay or u take.
Right Sergio--the free reduced kids always have the firs amusement season passes. I'm getting me some free money too. Tired of doin the paying
Did somebody leave the asylum door open starting yesterday, around 9:30?
You don't have to go deep into tax rates to understand this. It's this simple: Is it fair for anyone, whether they are rich or poor, to have to give up half of what they earn to a government? The answer is no, it's not fair.
I pay AMT, which is the Alternative Minimum Tax. Yet, almost 50% of the population pays no tax at all. How is that fair? Why don't all of us have to pay tax at some rate? We all benefit from our government, I'm told, so why don't we all pay something?
Finally, there is never any real attempt to reduce government costs. They seem to be a sacred cow. Get serious about cutting costs...that's the problem.
Also, let's stop comparing apples and oranges. Who cares what the tax rate was before? The issue is what is it today, what will it be on 1/1/3, and is it fair? That's it.
It makes no difference to me what other countries charge their citizens in taxes. I only care about what we are charged here in the US. It's the same logic I get frustrated about when I hear that we should be grateful because gas is $9/gallon in Europe. Who cares? I only care what it costs in Alamo, where I pay for it.
As a country, we should be embarrassed at how we have lowered the bar on almost everything in our society. We used to try and be the example of achievement and fairness, and now we do everything BUT that.
spcwt - While I am not likely aligned to many of the perspectives that you have shared in this post and others, I do believe that you are an intelligent and intellectual contributor. That stated, I followed the link you provided on the 5th to the Carroll and Prante treatment on Corporate Dividend and Cap Gain Taxation (E&Y, Feb 2012). It's a good report. Thank-you for sharing.
However, you have misled some of the 'grazing' sheep in this flock - I presume not intentionally. The fully burdened tax-rates that you cited from their report (50.8 to 56.7%) was an INTEGRATED tax-rate where the corporate burden and the shareholder burden are aggregated for discussion and comparison. For the sake of example (Carroll and Prante's, Table 1), a $100 of pre-tax corporate earnings is taxed at a top-tier rate of 39.2% (current). Presuming all of the remaining earnings are distributed as a dividend to a shareholder (ergo not likely), that individual would pay a top-tier Federal cap gain rate of 15% against those funds. In this simple example, $39.20 would be aggregated with (15% * $60.80 = $9.12) along with an average State tax (assumed to be around 4% against ~$61 yielding $2.45) WHICH would SUM to a grand total of $50.77 or 50.8% tax-rate on the original $100.
If the desire is to debate overall corporate tax structure and it's impact on global socio-economic conditions particularly those realized by the individual shareholder, that is best litigated elsewhere.
@ fedup: does this look like you? Web Link (Check the date.)
That sure does look like ALL of us who pay taxes. But not those who pay nothing.
Right now it looks like the Republicans are willing to compromise with higher taxes, less deductions,and raising the debt ceiling. I ask, what are the Dems and Obama doing about a compromise? He says "it's my way or the highway" in so many words. He does not know how nor is he willing to compromise. Doesn't sound like a great leader to me. He talks a good game. The American people will see what that means eventually in the long run.
Loise,....the "Republicans are willing to compromise with higher taxes?" Wow! I sure wish someone would tell THEM this news!!...they don't seem to have gotten the memo....
And of course, your whole premise is incorrect, as anybody who has been paying attention realizes. President Obama compromised on the Health Care Act (he wanted a single-payer format), and he compromised on extending the Bush Tax cuts to ALL last year, or didn't you know this.
The larger question comes down to this: Knowing the Bush Tax cuts and the two wars that weren't paid for, are the main reason of our economic woes,...don't you think that maybe, just maybe, the tax cuts should never have happened in the first place? And if so,...why wouldn't YOU want them to be rolled back now?
Anybody, who doesn't think we need a combination of new tax revenue PLUS spending cuts is just fooling themselves into thinking we'll ever get out of this mess.....
Maybe President Obama is just spending his "political capital," like the Shrub did after he was re-elected in 2004.
"Corporate taxes are borne by the shareholders, just like any other cost." Excuse me - do you take a personal tax deduction for charitable donations by every corporation whose stock you own? If you own stock in a company which is convicted of criminal acts, do you go to jail?
"A shareholder bears the burden of the corporate tax in the same way a parent bears the cost of their child's expenses. You could try and argue that the child pays its own expenses with its allowance, but we all know it is the parent that ultimately pays the allowance." This is complete nonsense. Corporations (which we all now know are "persons") pay taxes because they receive their own services from government which are independent of the services provided to their shareholders. And anyone who has been involved in government budgeting at any level gets a good idea of just how much of government expenditures are made specifically to help businesses prosper, whether it be enforcing regulations which ensure a consistent business environment or straight up capital expenditure on roads, parking lots, police and fire services, etc. I own a business which has real estate; we pay real estate taxes on that property. In return, the city where my business is located paved the streets, provides police and fire services, etc. Am "I" paying those taxes? No way. I invested in the business understanding its costs and my return is my distributed share of the net profit. The fact that the business has to pay for services (and we have private security in addition to municipal police, for example) is just part of doing business. When I buy stock in a company its costs - including taxes - are factored into the price I pay for the stock. To say I am "burdened" by those taxes is a conceit.
"The tax burden is not remarkably level. You obviously did not read the NY Times article that Citizen Paine posted above." Actually, if you back out the conceit of assigning corporate taxes to the wealthy the tax burden paid ***by human beings*** is in fact remarkably level. All the hoo-hah about how the wealthy pay X% of taxes (ignoring all taxes other than income tax) is exposed as simply more whining by the most blessed Americans when you look at the overall level of taxes paid relative to income of every sector of society. A person making $25K a year - hardly enough to keep a roof overhead - pays 24% of their income in taxes, while those making over $350K pay 35% (after backing out the bogus credit for corporate taxes)
That's hardly a dramatic difference, is it? The next time you complain about the taxes you pay think of the person grossing a bit over $2,000 per month who pays a quarter of that to help maintain government services we all benefit from.
Corporations don't pay taxes. People pay taxes. When the government levies a tax on a corporation, the corporation is more like a tax collector than a taxpayer. The burden of the tax ultimately falls on people.
It's like taxes on a boat. If you own a boat that's subject to tax, it's not the boat that pays the tax. The boat is an inanimate object; an asset. Likewise, a corporation is merely an asset owned by its shareholders.
There's arguments that a corporation's owners are not the only ones who bear the burden of the corporate tax.
Some argue that consumers bear a large share of the corporate tax burden, as companies can often pass along the tax costs to its customers in the form of higher prices for goods and services.
Others argue that workers bear the cost of corporate tax, because but for the corporate tax they would be paid higher wages.
The non-partisan Tax Policy Center calculates that 80% of the corporate tax is borne by capital (i.e. shareholders) and 20% by labor.
Here is a good article from Forbes Magazine about the subject Web Link
"Corporations don't pay taxes. People pay taxes. When the government levies a tax on a corporation, the corporation is more like a tax collector than a taxpayer. The burden of the tax ultimately falls on people." By this logic, tenants pay real estate taxes, not landlords, who simply collect it and pass it through to the county, correct? But in whose "tax burden" column do you suppose those taxes are assigned in your analysis?
It gets tricky when you think about it. The "assumptions" which underlie the concept of crediting corporate tax to the shareholders don't seem to assign annual corporate profits as income to them as well, do they? And why don't they assign any of that tax to the customers, who presumably would be able to buy stuff cheaper?
By my lights, your "tax burden" is the portion of your income you pay to the local, state and federal governments and don't have left over to pay your bills (or invest.) You don't pay corporate taxes out of your own income. Your income from your investments is net of any taxes (or other expenses) the corporations pay. You don't pay those expenses. (If you invest in fixed-income securities it is obvious but really no different.)
By the way - I would support a "pass through" form of corporate taxation where corporations were taxed like partnerships - i.e., no tax on the entity, with all profits and losses passed through pro rata to the shareholders, who would then owe income tax on their share of the company's products. But that would never happen, because the wealthy would end up paying more. Corporations as separate taxable entities allows legal tax avoidance.
But you knew that.
Tenants do shoulder the burden of property taxes by paying increased rents. If property taxes rise and landlords pass along that cost to renters, then tenants shoulder that tax burden. On the other hand, if the rental market is soft and landlords can't raise rents, then the landlord bears that tax cost. The person who actually cuts the check to the tax collector is irrelevant.
Corporations generally can't just raise prices and expect customers to pay more. The exception, of course, is for goods & services that are price inelastic (e.g. salt & pepper, kidney replacements, gasoline, etc.). For everything else, increased prices decreases sales. Someone is bearing the cost of corporate taxes, whether it is the customer, the workers, or the corporation's shareholders. Most scholars agree that it is largely borne by the corporation's shareholders. Web Link
Corporate profits are taxed twice, once at the corporate level (35% Federal tax + 8.84% California tax) and then again at the individual level when received as a dividend or factored into the value of the stock and taxed as capital gain when stock is sold. One of the main reasons more than 80% of small businesses in America are formed as LLCs, S-Corporations, partnerships, or sole proprietorships is to avoid paying corporate tax and thus avoid being taxed twice on the same income.
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