Corporate Taxes Are Regressive
by Ed Sawicki - June 17, 2020
Are the poor and middle-class hurt by corporations not paying their “fair share” of taxes?
Perhaps, but that's asking the wrong question. A better question is, “How can we reform the tax system to make it better for the poor and middle-class?”
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 and trying to raise corporate taxes, we should focus on raising the individual income tax rates on upper-income earners. A good 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 good decision.
Here's an example of a workable tax table when we're done with both steps. The green rows show the changes to the current tax table.
|Tax Rate||Income 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, so we don't significantly affect 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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