
U.S. business contributes smallest share of federal taxes in a generation - petethomas
https://www.bloomberg.com/news/articles/2019-05-20/u-s-business-contributes-smallest-share-of-taxes-in-generation
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PrimalDual
I still don’t understand corporate income taxes. These are just pass through
entities. All the money goes to actual people which are a lot easier to tax
than a corporation. I think it’s such a waste of human capital having
corporations incentivized to spend on armies of lawyers and accountants trying
to come up with some baroque legal construction to avoid taxes. Maybe I am
ignorant about tax law but people seem a lot harder to “invert” to cheaper tax
jurisdictions no matter how rich they are.

I would even go as far as saying that payroll taxes are the same. Taxes hidden
from the general public with weird incentives that break stuff in unexpected
ways. We would be better served with more income, property or sales/vat taxes.

~~~
BlackFly
"Corporations are people, my friend!"

Corporations are certainly not pass through entities. They own assets, they
exert influence on society. They benefit from government institutions. They
amass wealth so that they can spend it to their benefit.

Maybe, like people, it makes more sense to tax them on revenue then on profit
so they cannot invert to a cheaper jurisdiction?

Or am I a pass through entity? Arguably, most actual people are more pass
through entities with respect to money then corporations. Corporations are far
more likely than most individuals to amass wealth.

~~~
Xylakant
> Maybe, like people, it makes more sense to tax them on revenue then on
> profit so they cannot invert to a cheaper jurisdiction?

Taxing on revenue as opposed to profits harms corporations that have a low
margin, high turnover business (for example retailers)

~~~
IanCal
It also benefits large players as a chain of companies producing a product
would have a larger combined revenue than a single company with teams doing
the same work.

~~~
zaroth
Isn’t this just another way of saying “higher gross margin”?

~~~
IanCal
If I'm understanding what you mean right, no I don't think so.

If we have two companies, one makes a widget and the other buys it and adds a
clock to then sell:

Cost of making the widget $5, sale price $10

Cost of adding a clock $10, sale price $40

As two companies, the first has a gross margin of $5 and the second $20. If
the companies were to combine, they'd have costs of $15 and a sale price of
$40 = gross margin of $25.

I might not understand the term properly though, I based it on this
[https://www.investopedia.com/terms/g/grossmargin.asp](https://www.investopedia.com/terms/g/grossmargin.asp)

------
rayiner
According to the OECD, corporations paid 7.1% of the US tax burden. Note that
in the France, that Randian paradise, that figure was 5.1%:
[https://taxfoundation.org/sources-government-revenue-
oecd-20...](https://taxfoundation.org/sources-government-revenue-oecd-2019).
Denmark, Finland, Germany, Italy, and Spain also relied less heavily on
corporate taxes than the US.

The remarkable thing about the political debate in the US is that folks on the
left talk about all the public benefits the government offers in Europe, but
are dead silent about how Europe pays for those benefits: consumption taxes.
US consumption taxes account for 15% of revenues. That’s just half the OECD
average.

~~~
mcv
The problem with corporate taxes is that it's a race to the bottom.
International companies prefer to put their offices in countries where they
have to pay little in taxes, so countries keep reducing their corporate taxes
to remain attractive for companies. Meanwhile, consumers don't move around as
much, so consumption taxes are fairly reliable.

Which is sad, because consumption taxes are also fairly regressive.

If we want to move more of the tax burden to corporate profits, rather than
revenue (which is what consumption taxes basically are: corporate revenue
taxes), you need either international agreements to increase those taxes, or
tie profit taxes to local markets.

And now that I think of it, I think that might actually be possible: profit is
revenue minus cost, right? With consumption taxes being the same thing as
revenue taxes (which I think they are; it's a tax on the revenue corporations
get from selling to consumers. Dutch VAT (BTW) is also called "omzetbelasting"
(revenue tax).

So allow companies to deduct local costs from local revenue, and you've turned
revenue tax into profit tax.

This seems way too simple, so I'm probably missing something here.

~~~
AlexTWithBeard
Taxation does not have to be a race for the bottom, unless the state wants to
collect the money and give little in return.

Take New York State for example. It has some of the highest taxes in the
country. What do the citizens get back? Roads? Well, New York roads are known
to be some of the worst in the country. And you still have to pay tolls to use
them. Schools? Just average. State University? Again, quite average.

What the heck am I paying for?

~~~
0xcafecafe
As a non NYer, I feel people are getting taxed to live there. i.e: you are
paying to live where you live.

~~~
AlexTWithBeard
Well, NYS population declines the fastest about the states.

[https://www.democratandchronicle.com/story/news/politics/alb...](https://www.democratandchronicle.com/story/news/politics/albany/2018/12/19/leaving-
new-york-population-loss-steepest-u-s/2362167002/)

~~~
iacutone
Never thought I would see a D&C article on Hacker News.

------
gok
> Corporations only paid 7.6% of the tax take -- the lowest share since at
> least 1960, according to the IRS data

That sounds low but it's not far out of line of the rest of the OECD. The mean
is around 9%. Sweden is about 6%. The two members above 20% (or anywhere near
it) are Chile and Mexico.

Corporate income tax is kind of a mess to implement and enforce.

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megaman821
Why is it desirable to tax the business rather than the wealthy owners and
stockholders? If the business money flows to those making millions of year,
tax the millionaires some high rate at a new tax bracket.

~~~
ThrustVectoring
The business money need not flow through to their owners. It can instead show
up as unrealized capital gains, which A) gets taxed at a lower rate than
ordinary income, B) can be deferred indefinitely, C) can be cheaply borrowed
against for tax-free spending money, and D) gets wiped out when the shares are
transferred via inheritance or in-kind charitable contribution.

If you have $10M of non-dividend paying stock, you could conceivably spend
$200k per year while having a taxable income of _zero_ and remaining eligible
for income-based health insurance subsidies.

~~~
leetcrew
I often hear about C), but I have never heard an explanation of how it works.

I understand that if you have tons of valuable assets, you can get a loan
against them for a very favorable rate. but then you have to pay back the loan
or at least pay the interest on it. how do you do that without having at least
some income or realizing some capital gains?

~~~
ThrustVectoring
Your assets tend to become more valuable over time, which allows you to borrow
more money to pay the interest and give yourself spending money.

Eg, suppose you have $10M in assets and borrow $200k against it. Next year
it's worth something like $10.7M on average, you get charged something like
$8k in interest, and you borrow another $200k to spend. So long as you leave
enough of a buffer against volatility and the rate of growth of your assets is
high enough, you can just borrow money indefinitely against appreciating
assets.

People did this in the run-up to the 2008 housing crisis with homes, too. Take
out a loan, cash-out refinance later when it's worth more, end up with a house
you've taken more cash out of than put in.

~~~
leetcrew
ah, now I understand. sort of like the "safe withdrawal rate" for normal
people.

also sorry, didn't realize both of my questions went to the same person.

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exabrial
I'm ok with reduced taxes in general. An extraordinarily small percentage of
our tax money goes to essential services: police, fire, EMS, etc. The
efficiency of the US government (deliverable per dollar) is very poor. It may
not be like this in every country, but for now, it's likely best to keep those
dollars in the hands of individuals and businesses rather than a forced
transfer elsewhere.

~~~
dv_dt
The efficiency of government is pretty high when it comes to IRS collection,
to Medicare, to many systems. Defense spending I'd agree is extraordinarily
inefficient.

~~~
conanbatt
Does it: it costs 100's of billions to comply with tax law.

~~~
dv_dt
There are other factors there, like corporations lobbying to block the IRS
doing simple preparations of personal returns (like other nations do).

------
ChrisLomont
Once upon a time, most business income was taxed on the business side. For
small businesses, the tax paperwork was a pain. So passthrough laws were made,
allowing the owners to treat the business income as personal income,
simplifying tax paperwork. The tax is still paid.

These changes over decades have moved the same tax from being called corporate
tax to personal tax. There is nothing nefarious about it.

This last year, more such changes made to simplify taxes for small buisness
moved more of the income in this manner.

I have been a small business owner for a long time, and do precisely this,
because it simplifies my paperwork. The tax is still paid.

In aggregate this accounts for a lot more than most people realize.

Here's what happened this last year to move the needle

[https://www.nerdwallet.com/blog/taxes/pass-through-income-
ta...](https://www.nerdwallet.com/blog/taxes/pass-through-income-tax-
deduction/)

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jimbob45
Look, if you raise the rates or establish a more concrete AMT (Alternative
Minimum Tax - a base rate that can't be ducked under), then corporations will
just move their headquarters to another country with more favorable tax
conditions. IMHO establish AMTs on corporations not headquartered here to
incentivize them to move here and bring jobs.

------
stunt
If you look back in history, taxes always have been for ordinary citizens.
Even before modern tax systems.

~~~
Wildgoose
Only indirectly. Governments/Rulers taxed richer individuals and they used
their wealth (and/or other privileges) to extract excess money from ordinary
people in order to pay those taxes.

That's why I don't think records of earlier tax rates are really giving the
full picture.

------
jppope
Wondering why no one has mentioned the fact that Entrepreneurship has been
weakening for the last 25 years... Seems like one would expect corporate taxes
to go down when there's fewer companies.

~~~
dv_dt
Entrepreneurship has gone down because fewer people as a whole make enough
money from their wages to fund new ventures.

------
dfilppi
Businesses don't pay taxes, their customers do.

------
ETHisso2017
When people cite the stock market as proof Trump's trade war isn't hurting
average Americans, it's helpful to show them this chart.

------
stunt
I don’t think fair tax system doesn’t exist. (With a few exceptions in EU)

~~~
Tsubasachan
I don't think the US cares about fairness or wealth inequality. That's an
ideological position- decided by the American people. Berny Sanders wanted the
US to become like the Netherlands or Norway. The American electorate said no.
Case closed.

~~~
hannasanarion
You know that America more than one election ever, right?

(also, it was the Democratic electorate that rejected Bernie, the general
electorate would have gone for him over Trump according to polls)

~~~
ApolloFortyNine
It's worth pointing out according to poll Hillary was supposed to win as well.

~~~
hannasanarion
Yeah, by a much smaller margin.

------
known
Tax corporate revenues. Problem solved.

------
Causality1
All the tricks and loopholes means that the corporate tax rate is almost a red
herring to distract voters from what really matters, which is how easy it is
to hide your money overseas. As we've seen with Ireland, tax havens are fully
compliant with helping American corporations get around the law.

~~~
anonymous5133
Most of those "double-irish" tax tricks are actually illegal tax evasion. The
IRS has recently been auditing these companies and hitting them hard with back
taxes. The transfer pricing rules clearly state that the transfer pricing must
represent the nature of your business. You can't specifically use transfer
pricing to reduce taxes on purpose.

------
ObscureMind
Just to make sure we understand something here:

Taxation is robbery.

If you want companies and individuals to pay taxes, you're defending a state
that is unethical (as taxation forces people to give away their private
property through coercion), and authoritarian ("democracy" is no justification
for the use of force).

If you have any supposed justification for a centralized state that enforces
taxation through the use of force on its citizens, you're only denying the
fact you agree with crime.

Please stop talking about companies and individuals paying more taxes. We
should all be paying no taxes through coercion.

