April 1, 2015

SMART TAX REFORM HAS TO ANSWER A THRESHHOLD QUESTION FIRST...:

Smart Tax Reform Has to Account for This Massive Change (ERIC PIANIN, 4/01/15, The Fiscal Times)

The Joint Committee on Taxation review of the tax system shows how the mix between individual and corporate taxes has shifted over time. In fiscal 2014, individual federal income tax receipts were 8.1 percent of the gross domestic product, while corporate income taxes were 1.9 percent of GDP. 

Indeed, individual income tax revenues provide nearly half of all revenue in the federal coffers and Social Security payroll taxes account for roughly another third. Corporate tax revenues contributed just 10.6 percent of overall revenues, or about a third of what they were in the mid-1950s.

There are two important factors that help explain this disparity. The first is obvious: Despite the business community's loud complaints that the U.S.'s 35 percent top corporate tax rate is the highest in the world, most companies have dramatically reduced their tax liabilities through tax breaks or sheltering their income overseas. 

The other factor that gets little attention is that more and more businesses have changed their corporate structure to become "pass through" entities, such as sole proprietorships, partnerships and S-corporations. In these types of operations, profits are treated as individual income for tax purposes and are subject to lower tax rates than corporate income. Business owners who take this route also don't get hit with a second round of taxes on dividends and interest. 

...why would we want to punish profits/income?

Posted by at April 1, 2015 4:33 PM
  

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