On November 26, 2013, Bruce Bartlett writes in The New York Times:
Although the prospects for tax reform in Congress have dimmed of late, the lobbying activity has not. The corporate community continues to put pressure on Congress to reduce the statutory corporate tax rate, which, at 39.1 percent including state and local taxes, is the highest among members of the Organization for Economic Cooperation and Development.
What tends to get lost in the debate is how much corporations actually pay in taxes once various deductions and credits are taken into account. A corporation’s total tax bill divided by its profits is its effective tax rate. It’s hard to imagine a corporation paying anywhere close to 39 percent of all its profits in taxes, as that would mean it has no deductions or credits whatsoever.
According to the Internal Revenue Service, corporations had gross profits of $1.8 trillion in 2007 and taxable income of $1.2 trillion. Since the Tax Reform Act of 1986, new corporate tax preferences have widened the gap between gross income and taxable income. In 1987, gross corporate profits reported on tax returns were $328 billion and taxable income was $312 billion. Thus since 1987, taxable income has fallen to 68 percent from 95 percent of gross income.
Of course, many corporations are so adept at manipulating the tax code that they pay no federal taxes at all. According to Citizens for Tax Justice, a progressive group, 78 companies paid no federal income taxes at least one year between 2008 and 2010.
Raising tax rates on corporations as base to offer tax-reduction or elimination incentives is a means to implementing the Just Third Way agenda for broadening private sector ownership whereby EVERY American would have the equal opportunity to acquire long-term a viable ownership state as individuals in the FUTURE economic growth of the nation.
Under the Just Third Way more just and simple tax system, the following is proposed:
• Eliminate all tax loopholes and subsidies,
• Provide an exemption of $100,000 for a family of four to meet their ordinary living needs,
• Encourage corporations to pay out all their profits as taxable personal incomes to avoid paying corporate income taxes and to finance their growth by issuing new full dividend payout shares for broad-based citizen ownership,
• Eliminate the payroll tax on workers and their employers, but
• Pay out of general revenues for all promises for Social Security, Medicare, Medicare, government pensions, health, education, rent and subsistence vouchers for the poor until their new jobs and ownership accumulations provide new incomes to substitute for the taxpayer dollars to fill these needs.
• The tax rate would be a single rate for all incomes from all sources above the personal exemption levels so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term debt, but the poor would pay the first dollar over their exemption levels as would the hedge fund operator and others now earning billions of dollars from capital gains, dividends, rents and other property incomes which under some tax proposals would be exempted from any taxes.
• As a substitute for inheritance and gift taxes, a transfer tax would be imposed on the recipients whose holdings exceeded $1 million, thus encouraging the super-rich to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.
• The Federal Reserve would stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and
• Begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.
• The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets,
• The shares would be purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy.
• Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but
• Would not require citizens to reduce their funds for consumption to purchase shares.
The end result is that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on our only legitimate monopoly –– the State –– and whatever elite controls the coercive powers of government.
http://economix.blogs.nytimes.com/2013/11/26/effective-corporate-tax-rates/
