[quote=“meed18, post:461, topic:1661, full:true”]
It’s not the bottom line because it’s misleading.[/quote]
No it isn’t. It’s the real world.
Tax cuts begin expiring in 2019.
Hence, the JCT is correct.
Eh, they made the corporate tax cuts permanent.
Unfortunately for you, I made no such argument.
Then link to your source that explains your argument. I googled and found this
from the Washington Post which says the average taxpayer that makes $40k-50k will pay less in taxes between 2019 and 2027. How do you jive the two arguments? If people making $40k-50k are getting a cut, how do they also pay an additional $5.3 trillion in taxes?
I’m not sure why it seems like the focus is almost solely on corporate rates rather than the favored pass-through rates (which are also permanent cuts).
It’s weird to argue that the corporate rates are “lower” compared to regular income tax rates because the corporate profits are taxed twice. A company has profit, it has to pay the corporate rates. Then, if that profit gets distributed to the shareholders, the remaining amount is taxed again on the individual taxpayers’ returns. Currently, say MSFT makes $100 profit within the USA and distributes it to US shareholders. That $100 is $60.90 after taxes. Then, if/when they distribute that $60.90 as dividends, it is then taxed again on individuals’ returns. That means if someone’s at 25% marginal rate and the dividend is not qualified, that $100 is now only $45.68, and there’s been over 54% taxes taken out. If someone’s in the 39.6% tax bracket then the $100 in profit is only $36.78, and 63.2% taxes have been paid. If the dividends are qualified, it’s less absurd and the additional tax rate is 15% for someone in the 25% marginal rate or 20% for someone at the 39.6% rate, with an additional 3.8% tax from ACA. This results in between $46.40 and $51.77 remaining after income taxes, still 49-54% total income tax on corporate income that’s distributed to shareholders.
It is valid to argue that corporate rates are currently too high, not high enough, or just right. To me, the current corporate tax rates seem too high. I would lower them myself and increase the second tax when it flows to personal returns. Lowering the corporate rates rather than exempting distributions from personal income taxes is the progressive taxes option, because higher income shareholders can be charged higher amounts than lower income shareholders on their portion of the profits of the business they jointly own.
The special pass-through rates for rich people (with enough income they can re-categorize to make it worth the expense of setting up a pass-through entity) are a primarily 1%-er only benefit which is pretty senseless IMO. And it only applies to certain types of income in pass-through entities that further target special interests in a subset of the 1%. The estate tax changes is also another change that is targeted at only upper 1%ers.
*current effective corporate tax rates are actually less than the 39.6% rate, but I didn’t account for that above. Many companies are well into the 30-35% range, though. And looking at just effective rates can be misleading in many cases, such as when companies suffer losses for one or more years and then carry those losses forward to future years – which results in the low or 0% effective rates. Individuals get to carry forward losses too.
[quote=“meed18, post:463, topic:1661, full:true”]
Then link to your source that explains your argument.[/quote]
I made no such argument which you invented and claimed I made, so how could I possibly link to a source ?
Why are you asking me ? Ask the Washington Post.
I cited the Congressional Joint Committee on Taxation, which one has to assume has the best grasp on their own legislation. They are THE ORIGINAL source.
[quote=“Bend3r, post:464, topic:1661, full:true”]
It’s weird to argue that the corporate rates are “lower” compared to regular income tax rates because the corporate profits are taxed twice.[/quote]
I’m not sure why you think it’s “weird”.
Dividends are not a tax-deductible corporate expense, therefore both the corporation gets taxed (on it’s profits), and the shareholder gets taxed (on the dividends they receive).
If you pay a repairman to fix your washing machine, do you think he shouldn’t have to be taxed on that income because you already paid taxes on it ?
Get real.
As I pointed out upthread, the overwhelming majority of corporations already pay ZERO tax.
You: The congressional joint committee said people making 40-50k will pay more
Me: They must mean they will pay more over time than they will in the beginning, not compared to current law, because according to the WaPo, they will pay less than the current law.
You: I made no such argument.
Me: Ok, then post a link to explain your argument. I obviously didn’t get it.
You: I made no such argument, so how could I link to a source.
WILL YOU PLEASE POST THE LINK TO THE CJC REPORT THAT SAYS TAXPAYERS EARNING 40K-50K WILL PAY ADDITIONAL TAXES?
I’m trying to understand how that makes sense when everything else says taxpayers won’t pay more. I’m not calling you a liar. I assume the report exists. I’m just trying to see where they differ in how they describe what will happen in the future.
Your repairman example is not the same. The shareholders are the owners of the company. If you pay the repairman, the repair business does NOT pay income taxes on the wages that go to the repairman. Only net profit is taxed, wages are an expense that gets subtracted from income before arriving at the profit total. The repair employee pays taxes on his pay from the company, the company pays the employer side of the employee income taxes on the employee’s wages.
If the repair business is owned by a single person or any other passthrough, it does NOT pay corporate taxes and then personal income tax on top. The profits are only taxed once, at the personal income tax rates on the owner(s) return(s)-- or in the Senate’s plan possibly at 1/4 less than personal income tax rates. If the repairman is a sole proprietor, he also does not pay corporate taxes before paying regular income taxes. He just pays SE tax (that would have been paid by the employer if he worked for someone else) and personal income taxes.
The majority of companies do NOT pay zero taxes. Companies that lost billions in the last recession get to carry forward those losses to future years until they cancel out the losses. Just like individuals can except with more restrictions on the corporate side. This results in year(s) after huge losses where the effective rate is 0, but that’s because they haven’t made more net profits. There’s a few other things that can impact effective rates, and overseas income is a different issue (AAPL). Most of the nonsense articles opining 0% corporate taxes being paid by many large companies focused on companies that lost tons of money in 2008-2009.
For multinationals, the effective rate covers their global income. But of course companies pay different income taxes on income earned in each country, which drags the effective rate down since USA is the highest corporate tax rate. And they can play games with where they pay taxes on parts of their income. There’s other loopholes and carveouts, too, I’m not claiming there’s no room for improvements to make it more fair across the board.
This article cites an average effective rate of 21.2% for a subset of 258 of the fortune 500 companies. A far cry from 0%. https://www.nytimes.com/2017/03/09/business/economy/corporate-tax-report.html
[quote=“meed18, post:467, topic:1661, full:true”]
WILL YOU PLEASE POST THE LINK TO THE CJC REPORT THAT SAYS TAXPAYERS EARNING 40K-50K WILL PAY ADDITIONAL TAXES?[/quote]
It’s not on page 12 of the report or whatever, it’s math, a calculation that many have done. Not to mention a spokesperson for the JCT made the same point.
[quote=“Bend3r, post:468, topic:1661, full:true”]
Your repairman example is not the same.[/quote]
Well, then you’re free to hold any unsubstantiated belief you like.
The General Accounting Office, the investigative arm of the U.S. Congress, disagrees with you.
The first 3 reports on that page that I downloaded were 4, 11, and 7 pages, so I’m not sure what report you’re referring to that has that info on page 12. You’re here giving your opinion, I assume trying to convince people that your way of thinking is correct and others are incorrect. Why are you making it so difficult for us to see the facts that you say your opinion is based on? You’re not helping your case when someone asks for a specific link to a specific report and you just post the homepage for the reporting agency.
Here’s an interesting stat from page 1 of one of those reports, however. https://www.jct.gov/publications.html?func=startdown&id=5044
Under present law, those in the $100,000 and up income category will pay 78.7% of all federal taxes in 2019. Under the proposal, they will pay 78.9%. In 2027, they will pay 78.6% Are they getting a cut? Yes. Are they still paying more than their “fair share?” Yes.
But, there is very little good news at the bottom end, which does bother me. People in the $10,000 - $30,000 income range will see their taxes start to go up in 2021 with those making $20-30k paying a tax rate as much as 1% higher (an avg of 5.1%) in 2027. Yeah, that’s after the cuts expire, but they are paying .5% more (an avg of 4.2%) starting in 2021 which continues until the extra bump in 2027. This does indeed bother me.
However, I don’t see a bump up in tax rate for the $40,000 - 50,000 income range that you purport exists. They don’t see an increase until after 2025, and even then, the increase in 2027 is .5%, bringing their average rate to 11.5%. I have a feeling if you ask the people in that income range if they would like a tax cut for the next 8 years if that means that they MIGHT have to pay .5% more in taxes in 2027, but knowing that congress is likely to consider keeping their rate lower, they would probably be happy with that offer.
So… with that info, why are you focusing on the $40-50k folks claiming they will pay more (which they won’t), when there are actual people, poorer people than those in the $40-50k range that will lose out with this proposal? Why not be truthful and say the lower class are the people actually getting screwed? This is a middle, upper middle, lower upper, upper, and upper upper class tax cut. That’s just a fact. The lower middle and lower classes get anything from a very small tax cut to a tax hike.
Now of course, there is the argument that you can’t “cut” taxes for those that don’t pay taxes. But that’s not true either. The $10k-20k income ranges pays negative taxes in the form of refundable credits. So a tax cut for them would be even more refunded. You can argue that they shouldn’t get a bigger refund, but I hate when the Republicans say you can’t cut taxes for those that don’t pay them. You can and we have. Regardless, I don’t like that their average rate is going up. If they pay, they should pay less. I know you can’t drop a really low rate that far, but it should still drop if this were a truly across the board tax cut.
[quote=“jerosen, post:420, topic:1661, full:true”]
They say that the actual corporate tax rate in USA is 21% versus 24% for comparable G7 countries.
[/quote]It’s a lot more complicated than that. Here is a link to the March, 2017 CBO report, which is the latest that I could find on this issue, which shows various ways of comparing different countries’ corporate tax rates: https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/reports/52419-internationaltaxratecomp.pdf
As a side note, although comparing effective corporate tax rates is important (and the CBO report shows different ways of comparing them), the fact that the US has the highest marginal corporate rate in the developed world also has a number of very important implications. It’s not that different from the way that individual taxpayers examine their own tax situations and adjust their behavior based on it. Your effective tax rate may amount to a fraction of your top marginal rate, but if you need to decide whether it makes sense to work an extra X number of hours to earn more money, what matters is the marginal tax that you’ll have to pay on that money.
In other words, suppose that your effective rate is 5%, but at this point, every additional dollar that you make would be taxed at 35%. If you have an opportunity to make an extra $5,000, in order for you to decide whether working extra hours would be worth it, you’d discount that $5,000 by the 35% tax rate (and not by the 5% effective rate, which would not affect these calculations in any way), which would tell you how much you’d earn per hour on an after tax basis.
Corporations are not that different in this respect, as they calculate the profits on an after tax basis. There is no reason for them to hire additional employees, for instance, if there is no after tax profit associated with that investment. Sure, their effective tax rate is far lower than 35% (just like our individual effective tax rates are far lower than the highest marginal tax rates that apply to our income), but if the revenue associated with hiring additional employees would be taxed at 35%, that’s the rate that they have to use to calculate the after tax profit (or the absence thereof) attributable to this particular hiring decision.
This doesn’t figure in estate taxes or passthrough changes, though, which will ~100% go to that 100k and over category. IMO, these changes will have more than a 0.3% effect on their tax burdens…
$100 K+ is also a large range. People at the lower side of that ($100-200k) may see significant tax increases (much of that loss of SALT deductions? For example, someone on the lower end in a high COL might have much of their net worth tied up in their primary residence. Meanwhile, someone with $100M would instead own tons of property but still be able to deduct SALT with no change because those properties are businesses) while the people at the $M+ get the large cuts, ending up with an “average” near 0 since there are more people at the $100 K side than the $B side.
Because of how complicated our tax law is, there will always be winners and losers when particular parts of the law are changed in an attempt to increase or decrease rates for a huge swath of the population. While I would prefer tax “reform” and lower rates as part of the reform, I just don’t see that as something that could happen in our current climate. I would also prefer longer lasting cuts for the lower class. Unfortunately, a bunch of people won’t benefit, but when I see those numbers showing the average rates going down for nearly every income level and tax revenue going down across the board, I’m in favor of this legislation.
The posters with those figures that they displayed on the Senate floor said that with an asterisk, and it seems to make sense because those things are much harder to predict. Maybe I’ll have time and look at the report itself later. The report was also not based on the final version that passed the Senate. And of course things can change with the reconciliation procedure. Nothing is exactly set yet.
Yes. People also are free to have differing opinions on whether we should have a flat tax system, a more regressive system or a more progressive system, and on whether the government spending should be a larger or smaller percentage of the economy than it is now. As someone who is fortunate to have much more than most although not in 1%* or 0.1%, I am of the “government should be a smaller than current part of the economy” and “the tax system should be equal or more progressive than currently” opinions, and that shapes my assessments. I therefore think that creating another $1T+ debt mainly to cut the 0.01%'s tax burden is a bad idea. Federal debt is not necessarily ever paid back, but it does function as an additional tax in future years as the interest payments only grow and never go away.
*depending how it’s defined. Recently realised I am in 1% by age on networth excluding home value but only in top 6-15% on other methods.
Just wait until they start on the reconciliation work. It’ll give you fresh stuff to argue about. 
[quote=“meed18, post:474, topic:1661”]
when I see those numbers showing the average rates going down for nearly every income level
[/quote]Just as a cautionary note, the tax rates that most publications are using in their analysis are the regular federal income tax rates. Since the Senate plan retains the AMT, and you pay the higher of the AMT or the regular federal income tax, reducing the regular federal income tax rates does not reduce the tax liability of those in the AMT territory.
If this is true for any business then it gives you a good idea which CEO’s to fire immediately.
“Our profitability is down this quarter because while we were thinking of trying to make more money we then realized that the government would take some of it”
Good points.[quote=“Bend3r, post:475, topic:1661”]
I therefore think that creating another $1T+ debt mainly to cut the 0.01%'s tax burden is a bad idea.
[/quote]
Any reduction in gov’t revenue is good in my mind because gov’t can only spend what it takes in plus whatever the electorate will tolerate above that. Since the electorate seems to tolerate a lot, I’m in favor of anything that could hopefully lead to less spending. Passing tax cuts aren’t the best way to go about getting spending cuts, but considering nothing else has led to spending cuts, I’m willing to take the risk that this could help.
The majority of the electorate doesn’t want the tax reform we’re getting. Doesn’t seem to matter what the electorate wants.
[quote=“jerosen, post:478, topic:1661”]
If this is true for any business then it gives you a good idea which CEO’s to fire immediately.
“Our profitability is down this quarter because while we were thinking of trying to make more money we then realized that the government would take some of it”
[/quote]You took the quote out of context. The point is that if you are trying to examine the post-tax impact of any activity that you are considering on your bottom line, you use marginal rather than effective taxes. Hence, the reason that even if your overall effective tax is low, the impact of marginal taxes on any additional earnings can easily cause you to forego the activity.
Consequently, the reason that the fact that the US has the highest marginal corporate tax rates of any developed country makes an enormous difference, even though their effective taxes are much lower.