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That's the nominal corporate tax rate not the effective tax rate which is closer to 18.6%. Also you're dividing by 200 when you made 250. My calculation with

That's the nominal corporate tax rate not the effective tax rate which is closer to 18.6%. Also you're dividing by 200 when you made 250. My calculation with those two corrections give 27.6% which is lower 13% 20018.6% + 200(1-18.6%)15% + 5015% 37.2 + 24.42 + 7.5 = 69.12 / 250 = 27.6% Marginal Tax rate for 38k-90k = 40.8% 90k-110k = 43.8% 110k - 190k - 28% 190k- 420k - 33%

SilasX 9y ago
>That's the nominal corporate tax rate not the effective tax rate which is closer to 18.6%. That's with journalist accounting where they reject valid expenses to "prove" that the tax rate is lower. >Also you're dividing by 200 when you made 250. No -- the investment paid for itself (the 100) then earned 200 (the amount above what I invested), then paid 50 out of that as a dividend. It looks strange because it doesn't make sense to tax for distributing the already-taxed profits, and yet people still think the 15% tax on the distributed part of the taxed profit is too low(!), specifically because they ignore the taxes it already had to pay -- that was the point.
- JamesBarney 9y ago
  Oh whoops I messed up with the 250. You're right it should have been 200. The 18.6 number doesn't come from journalists though but from the CBO. And these numbers are in line with similar studies by other entities. I'm sure you agree that its not just how much your taxed on profit, but also how much profit you had to record that matters.
  - AnthonyMouse 9y ago
    > I'm sure you agree that its not just how much your taxed on profit, but also how much profit you had to record that matters. If you're a retailer and you buy 1000 widgets at $9 and sell them at $10, then pay $350 in income tax, is your effective tax rate 35% or 3.5%? Can you see the problem if the government demanded 35% of total revenue instead of total profit? What you're no doubt complaining about is the fact that many of the deductions can be gamed. But that doesn't mean you can discount the legitimate ones.
    - JamesBarney 9y ago
      A more apt analogy is imagine you are selling 1000 widgets @ $10 that you bought for $9 in two different countries. One country taxes you 20% but you can't mark down the depreciation of the building you're using so you're taxed $200 of your $1000. The other country taxes you 30% but you get to mark down the $500 depreciation of the building you're using as an expense so instead you record $500 profit. Which means you're taxed $150. You can see how even though the statutory tax rate is higher in the first country the effective tax rate is lower in the second. Different tax jurisdictions have different allowable expenses and deductions, which mean your recorded profit can be different between them. The U.S. has an especially high statutory rate, but also allows for many more deductions and expenses than other countries. The effective tax is how you take into account these differences in deductions and expenses between countries, and the U.S. has one that is in the middle of the pack.
      - AnthonyMouse 9y ago
        The problem with considering things that way is that then you can't compare countries unless they have identical economies. Suppose two countries have exactly the same tax law. One of them is full of online retailers and the other is full of brick and mortar retailers. Maybe the second country has an oppressive package delivery monopoly. The brick and mortar retailers charge higher prices and have higher expenses (more employees, more real estate) and payroll and rent are deductible in both countries. So the online retailers can make the same dollar amount of profit on lower revenue and expenses and as a result that country is considered to have a higher effective tax rate, even though their tax law is identical, because their economy is composed of a different type of companies. And no two countries have the same economy, so you end up measuring something that can't usefully be compared with anything. Effective tax rate as percentage of total income is a concept that originated in personal income tax, where it makes sense because the default is for expenses to not be deductible from personal income. But for business the default is the opposite. What expense is a business entity going to have that isn't a business expense? Which means that effective tax rate for a business is primarily a question of what percentage of revenue is profit.
- JamesBarney 9y ago
  Silasx do you think it would be better if they taxed capital gains as income and dropped the corporate tax rate?

SilasX 9y ago

>That's the nominal corporate tax rate not the effective tax rate which is closer to 18.6%. That's with journalist accounting where they reject valid expenses to "prove" that the tax rate is lower. >Also you're dividing by 200 when you made 250. No -- the investment paid for itself (the 100) then earned 200 (the amount above what I invested), then paid 50 out of that as a dividend. It looks strange because it doesn't make sense to tax for distributing the already-taxed profits, and yet people still think the 15% tax on the distributed part of the taxed profit is too low(!), specifically because they ignore the taxes it already had to pay -- that was the point.

JamesBarney 9y ago
Oh whoops I messed up with the 250. You're right it should have been 200. The 18.6 number doesn't come from journalists though but from the CBO. And these numbers are in line with similar studies by other entities. I'm sure you agree that its not just how much your taxed on profit, but also how much profit you had to record that matters.
- AnthonyMouse 9y ago
  > I'm sure you agree that its not just how much your taxed on profit, but also how much profit you had to record that matters. If you're a retailer and you buy 1000 widgets at $9 and sell them at $10, then pay $350 in income tax, is your effective tax rate 35% or 3.5%? Can you see the problem if the government demanded 35% of total revenue instead of total profit? What you're no doubt complaining about is the fact that many of the deductions can be gamed. But that doesn't mean you can discount the legitimate ones.
  - JamesBarney 9y ago
    A more apt analogy is imagine you are selling 1000 widgets @ $10 that you bought for $9 in two different countries. One country taxes you 20% but you can't mark down the depreciation of the building you're using so you're taxed $200 of your $1000. The other country taxes you 30% but you get to mark down the $500 depreciation of the building you're using as an expense so instead you record $500 profit. Which means you're taxed $150. You can see how even though the statutory tax rate is higher in the first country the effective tax rate is lower in the second. Different tax jurisdictions have different allowable expenses and deductions, which mean your recorded profit can be different between them. The U.S. has an especially high statutory rate, but also allows for many more deductions and expenses than other countries. The effective tax is how you take into account these differences in deductions and expenses between countries, and the U.S. has one that is in the middle of the pack.
    - AnthonyMouse 9y ago
      The problem with considering things that way is that then you can't compare countries unless they have identical economies. Suppose two countries have exactly the same tax law. One of them is full of online retailers and the other is full of brick and mortar retailers. Maybe the second country has an oppressive package delivery monopoly. The brick and mortar retailers charge higher prices and have higher expenses (more employees, more real estate) and payroll and rent are deductible in both countries. So the online retailers can make the same dollar amount of profit on lower revenue and expenses and as a result that country is considered to have a higher effective tax rate, even though their tax law is identical, because their economy is composed of a different type of companies. And no two countries have the same economy, so you end up measuring something that can't usefully be compared with anything. Effective tax rate as percentage of total income is a concept that originated in personal income tax, where it makes sense because the default is for expenses to not be deductible from personal income. But for business the default is the opposite. What expense is a business entity going to have that isn't a business expense? Which means that effective tax rate for a business is primarily a question of what percentage of revenue is profit.
JamesBarney 9y ago
Silasx do you think it would be better if they taxed capital gains as income and dropped the corporate tax rate?