Who pays corporate taxes?

by Ed Sawicki

Why do the talking heads on the corporate “news” networks complain about corporations not paying their fair share but seldom mention wealthy individuals?

The answer lies in who really pays corporate taxes. You do.

Corporations are not like individual taxpayers. They don't pay taxes with their own money—they're tax collectors. Any taxes they pay are paid for by their customers through higher prices for goods and services. Corporate taxes are in effect sales taxes.

Sales taxes are regressive taxes that are harmful to the poor and middle class and contribute to social inequality. With regressive taxation, the poor pay with money better used for food, rent, and health care. The uber-wealthy pay with pocket change.

Instead of making a fuss about corporate taxes, we should increase individual income tax rates on upper-income earners. An excellent first step is to add margins to the tax tables for the uber-wealthy—the billionaires.

The second step is to reduce the tax rate on low-income earners. Reducing the current lowest margin (Up to $9,525) to zero for the next decade—or forever—would be a wise decision.

Here's an example of a workable tax table that accomplishes both steps. The green rows show the changes to the current tax table.

Tax RateIncome amounts
0%Up to $9,525
12%$9,526 to $38,700
22%$38,701 to $82,500
24%$82,501 to $157,500
32%$157,501 to $200,000
35%$200,001 to $500,000
45%$500,000 to $1 million
55%$1 million to $10 million
70%over $10 million

Additionally, we should tax capital gains the same way we tax ordinary income. It should be a progressive tax designed to minimize the impact on middle-class 401K plans. The capital gains tax rate should be the same as for ordinary income after, say, $350,000 and adjusted for inflation yearly.

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Sources

Investopedia: Regressive Tax

Investopedia:The Difference Between Regressive, Proportional, and Progressive Taxes

Wikipedia: Regressive tax

Wikipedia: The World's Billionaires

 

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