Posts Tagged ‘Corporate taxes’

In Part I, we saw that the distribution of income and, especially, wealth in the U.S. is extremely inequitable, with the top 1% owning 42% of financial (nonhome) wealth, with the top .1% owning as much as the bottom 90% combined, and that the bottom 50% of the population owns essentially no wealth at all. As well, since total wealth in the U.S. is currently $81.5 trillion, average (not median–which is half above, half below) per capita wealth comes to over a quarter of a million dollars. Yet distribution of wealth is so lopsided that most people have almost no net worth.

We also saw that American workers–who have one of the highest average work weeks in the world, 47 hours–have seen their real wages decline nearly 10% since 1973, while productivity per hour worked increased by, on average, over 1.75% per year during the same period; compounded, that works out to an over 80% increase in productivity. So, American working people are producing far more than we did four decades ago, and are being paid less. Do the math, and it works out that to maintain the same average standard of living as in 1973, we should (assuming a 40-hour work week then) only be working 22 hours per week, had wage increases kept pace with productivity.

Other factors aggravate the disparities between rich and poor and between the number of hours we should be working and the number of hours we actually work.

One of those factors is taxation. Contrary to popular belief (promoted, notably, by the wealthy news models at Faux News), the poor pay more as a percentage of income than the very wealthy, who typically pay about 30% of their income as taxes.

Let’s take as an example a single person, let’s call him Bub, living here in Tucson working 40 hours per week for $10 an hour. (Wages are awful here–a number of my neighbors make under $10 an hour.) That works out to a gross income of $20,800 a year. Bub will pay 15% federal income tax on income above $9,225, and another 7.65% social security tax on the whole $20,800–if he’s self-employed, he’ll pay 15.3% social security tax. He’ll also pay 2.88% state income tax on top of his federal income taxes. So, if he’s self-employed, Bubba will be paying a combined income and social security tax rate of 33%; if he’s working for someone else, he’ll pay a rate of “only” 25% before taking the standard $6300 personal deduction. Take that out, and Bub’s income tax rate, if self-employed, effectively falls to roughly 27% if he’s self-employed, and 22% if he’s working for someone else.

Then there are other taxes. Since Bub will almost certainly be unable to save a dime, he’ll pay additional taxes on every dollar he makes (and spends). In Tucson, there’s an 8.1% sales tax, which Bub will pay on all purchases other than food and prescription drugs. He’ll also be hit, indirectly, for property taxes if he’s a renter–landlords simply bundle in property taxes with rents. Since the average U.S. household pays $2089 per year in property taxes, there goes another 10% of Bubba’s income. (To make matters worse, Bub can’t deduct a a penny of the rent he pays from his state and federal income taxes.) Then there are excise taxes. If Bub drives 15,000 miles a year and his car gets 25 miles per gallon, he’ll pay over $200 per year in combined state and federal excise taxes, another 1% of his income. And then there are the “sin” taxes levied on tobacco and alcohol. For simplicity’s sake, let’s say Bub doesn’t drink but is a tobacco addict smoking a pack a day. With the “sin” tax here of $2 per pack, there goes another $730 per year,  3.5% of Bub’s income.

Add it all up, and Bubba is paying roughly 40% of his income in taxes. Of course, the rich also pay the above taxes, but as a percentage of income they pay far less. Someone with an income of $1 million per year can live very comfortably on $100,000 per year. So, he’ll be paying only 10% of what Bub does as a percentage of income on such taxes.

This is all particularly irritating when you realize that “unearned income”  (basically capital gains) is taxed at a lower rate than “earned income.” In other words, those who work pay a higher tax rate than those who don’t. The capital gains tax for those receiving under $186,000 per year is only 15%, while the income tax rate for those earning over $37,000 is 25%, rising to 28% for those earning up to $186,000.  At an income of $400,000 the tax rate for earned income is 33%, while the tax rate for capital gains is 18.8%.

Making this still more aggravating is that many multi-billion-dollar corporate “persons” pay no taxes. Those who successfully avoided paying taxes last year include General Electric, Goodyear, Boeing, Verizon, Time Warner, Xerox, Weyerhauser . . . the list goes on.

So, while many mega-corporations pay no taxes, Bub and a great many average working Americans are paying a good 40% of their wages as taxes, not getting a hell of a lot for them, and are working far more hours than necessary as a result.

More on that in the next section, covering government waste.


by Chaz Bufe, compiler/editor of The Heretic’s Handbook of Quotations

Certain economic assertions keep popping up year after year, much in the manner of venereal warts. Here are a few of the most common assertions (in italics at the beginning of sections), along with some of the reasons they’re bogus:

* Stock ownership is so widespread that we all have a stake in the economy, that we all benefit from it. This is belied by the facts: the top 1% own 35% of stocks and mutual funds; the next 9% own 45.8%; and the bottom 90% own 19.2%. Other measures of financial wealth are even worse. The top 10% own 91.1% of business equity and 93.9% of financial securities. The top 1% own 42% of financial wealth; the next 9% own 43%; and the bottom 90% own 15% of total financial wealth.

Distribution of wealth is so lopsided in this country that according to Politifact the Walton (Wal-Mart) family owns more wealth than the bottom 41.5% of American families combined.

* It doesn’t matter if corporations are taxed, because they pass those taxes on to their customers. If this is true, one wonders why corporations so strenuously attempt to shift taxes to individuals. One might also wonder why, if corporations are people, according to a grotesque, still-in-force Supreme Court ruling (Pembina Consolidated Silver Mining Co. v. Pennsylvania – 125 U.S. 181 [1888]), these “people” should be exempt from paying taxes.

And while it is hard to believe, competition still exists in some sectors of the economy, and if corporations are taxed, they can’t automatically pass along the taxes to their customers. They can, to preserve or expand market share, shave their profit margins and executive compensation. Beyond that, not all individuals use all products. For instance, a tax on companies that produce corporate jets will affect corporations that produce and corporations that buy private jets, not the vast bulk of consumers. Further, consumers can choose to avoid passed-on taxes by buying goods from manufacturers who have trimmed their profit margins, by buying used goods, by reducing consumption, or simply by refusing to buy nonessential goods.

* Unemployment is a result of laziness. If this were so, why do unemployment levels vary so drastically over the years, and often change nearly overnight (as in 1929 and 2008)? Is it really the fault of employees’ laziness that employers shut down their businesses and lock their doors? Do employees really prefer losing their health benefits, pensions, and most of their income in favor of limited-time unemployment insurance checks? As anyone who’s ever suffered it knows, unemployment is a miserable, stressful condition, often accompanied by irrational shame. That shame–and endless repetition–is why well-paid corporate lackeys get away with uttering this cruel lie.

* Military spending is good for the economy. The U.S. government’s 2013 military budge is $682 billion, by far the largest military budget in the world. It’s more than the military expenditures of the next ten countries combined. and that $682 billion doesn’t even include veterans’ pensions, veterans’ healthcare costs, or the cost of the interest on military spending-incurred debt.

Somehow this is supposed to be good for the economy. Why isn’t it? Isn’t money flowing into communities with “defense” industries and military bases? Yes, it is. But that money produces nothing to meet human needs (food, housing, medical care, utilities, transportation, etc.). To put this another way, this massive expenditure of taxpayer money pays people and companies that contribute nothing useful to the economy.

In fact, the harm extends beyond this utter waste. Those who perform useful work are not only taxed heavily to pay for military spending, their tax dollars that go to the giant military make-work project devalue the money that’s left in their pockets. Rather than their spending the money taken from them on useful goods and services (which would stimulate demand and employment), the government spends their money nonproductively. That spending results in no additional useful goods or services. The amount of money in circulation remains the same, but there are fewer goods and services than there would be if taxpayers kept their money and spent it on their own needs. Military spending devalues the wages of everyone not on the military-industrial dole.

Military spending is not a boon to the economy. One could just as easily spend the $682 billion military budget on the mass production of ping pong balls and produce the same economic “good.”

Military spending is to the economy as a shot of methedrine is to the body. It produces a temporary feeling of euphoria, but at a high ultimate price.

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