7 ms·

This is crazy how economy is tilted in favour of these big corporations. If you are a worker, it is not uncommon to pay over 40% of tax and if you work on your

This is crazy how economy is tilted in favour of these big corporations. If you are a worker, it is not uncommon to pay over 40% of tax and if you work on your own small business you can pay even more and have very little left to reinvest. Then you have progressive tax that is preventing you from saving much - if you want to save for a deposit to buy a house, spend time on education and getting a better job, you'll get hit by much higher tax and it will take ages to save anything. Such taxes are often sold to the public as taxes on the rich, but rich people can easily afford ways around it. I'll vote for any party that will reshuffle the tax system, so that big corporations will have to pay tax just as any other business and tax progression will be removed, so that people will have a chance of levelling up. They should also add a tax on spending money with offshore cards, dividends and so on so that the rich will pay what they are supposed to pay.

tenaciousDaniel 6y ago
Yep. I just got an equity payout from an acquisition. It’s a lot of money, though it isn’t going to allow me to retire early. Would be enough for a house down payment, which is good enough for me! However, I am paying literally 40% in taxes due to how it was paid out. As someone who desperately needs this money, it’s devastating. To hear that large corps can weasel their way out of paying is extremely infuriating.
- lotsofpulp 6y ago
  How was it paid out that your federal income tax liability is 40% Or are you talking about withholding? Which is not accurate to describe as “taxes paid”. Also, if including state tax, then it might be higher, but I would still be surprised if your total tax liability was over 40%.
  - sokoloff 6y ago
    They didn’t claim their federal tax liability was 40%; they claimed they were paying 40% total tax rate on the acquisition-related income, something which is true for most employees in most states for many acquisitions.
    - tenaciousDaniel 6y ago
      Yep, total tax rate.
    - lotsofpulp 6y ago
      I’m aware, but I don’t see how that has a relevance to discussion Netflix’s federal income tax liability. My point was people in these comments are throwing out personal tax liability figures for comparison including various things such as state taxes, social security, Medicare, which makes things not very comparable.
      - sokoloff 6y ago
        Because people are people and not math proof generation engines. Someone worked hard, achieved an intermediate goal that they hoped was going to move them one rung up the economic ladder only to find out that taxes took a much larger bite than they’d hoped or previously considered. So, they’re naturally discouraged to read about some big company somewhere paying a much lower overall rate while comparing it to their own. Perhaps the real question is why the authors of these articles don’t put everything into terms more directly relatable to the people reading the article? That’s because doing so makes for less outrage-sharing of the article.
  - bzbarsky 6y ago
    If it's paid out as ordinary (W-2) income, then your top federal tax rate right this minute is 39.35% (37% regular tax, 1.45% medicare tax, 0.9% medicare surtax). If it's paid out as some sort of investment income not subject to long-term capital gains treatment (e.g. interest, non-qualified dividends), then your top federal rate is 40.8% (37% regular, 3.8% net investment tax). That does assume $500k of taxable income not counting the payout we're talking about here, to hit that 37% tax bracket. If you have kids, you can hit these sorts of marginal rates at lower incomes too, because of the 5% marginal tax rate from the child credit phaseout. I should note that money is fungible, so the fact that some of this is claimed to be "medicare" tax and some is claimed to be "income" tax is irrelevant to both the person paying the tax and the government collecting the tax. Medicare is not funded solely by the "medicare" tax in practice, so the fact that there's a separate tax is more or less an accounting oddity.
    - TuringNYC 6y ago
      >> If it's paid out as ordinary (W-2) income, then your top federal tax rate right this minute is 39.35% (37% regular tax, 1.45% medicare tax, 0.9% medicare surtax). There is also state tax, which can be significant (double digits), esp for top brackets.
      - bzbarsky 6y ago
        Indeed. That varies widely, though, and corporations are subject to it too, with its own weirdnesses, so I was trying to stick to apples-to-apples federal tax comparisons.
        TuringNYC 6y ago
        I does vary widely, but the weighted majority of all such cases are in California (and NY might be next.) Those two states happen to have among the highest state taxes also. Consider this: Where were the last 20 major IPOs? The last 20 major acquisitions? Where were the founding teams (i.e., the ones with the most stock facing such issues.) ...I'll bet 80% or more of these were in CA. I'm only pointing this out because once you're a super-successful startup and you've gone thru all the steps for a successful liquidity event, there is the final bath of taxes :-/
- pessimizer 6y ago
  Needing the equity payment from your acquisition, untaxed, to put a down payment down on a house is not what the vast majority of people would think of as desperation. You're going to get enough tax breaks and subsidy for buying the house anyway.
  - frankbreetz 6y ago
    What kind of tax breaks and subsidies are available for home buying?
    - frockington1 6y ago
      The big one is deducting interest paid. It greatly reduced the amount of money the government takes from me every year
- ghufran_syed 6y ago
  “small” corporations could do exactly the same - if you find employment easier than starting your own company and fighting to get customers, maybe everyone else does too? But if there is an economic benefit to people starting companies, shouldn’t tax policy also recognize that and try to make it easier? You never see headlines saying “$blahCo lost $400 million dollars of their own money last year, of which $50 million was taxes to the government and $300 million was payment to employees”. Doesn’t that suggest you’re only hearing one side of the story now?
- darkarmani 6y ago
  > However, I am paying literally 40% in taxes due to how it was paid out. As someone who desperately needs this money, it’s devastating. To hear that large corps can weasel their way out of paying is extremely infuriating. You can weasel out of it as well. You need to exercise your options at least a year before acquisition. Often you can do this even if you haven't vested the options yet.
cies 6y ago
Dont forget: consumers also pay the taxes of the companies as they are factored into the costs of products and services. What matters here is the relative incentive/disincentive that taxation signals. 40% on income from labour shows: dont get income from labour! Small percent on income from property (dividents, etc) show that that's the best place to get money from. Almost zero percent on pollution signals: go for it!
- lotsofpulp 6y ago
  What is the source for 40% tax on income for labor? https://www.irs.com/articles/2020-federal-tax-rates-brackets-standard-deductions/ https://www.irs.com/articles/2020-federal-tax-rates-brackets... If you’re adding state taxes, note that the linked article is discussing federal income taxes only. Even then, including state taxes does not get you to 40% for 99% of people.
  - areyousure 6y ago
    For (single) self-employed people making between ~$85k and $137k, the marginal federal tax rate they face is a little under 40%, with 24% from your link, ~12% from Social security, and ~3% from Medicare. This excludes the effect of phaseouts of various deductions (eg, student loan interest), which can easily drive that higher while remaining within the context of federal taxation only.
    - drdec 6y ago
      Everybody forgets about Social Security and Medicare. Writing out the federal marginal rates for the different income brackets with SS and Medicare included is very eye-opening.
      - bzbarsky 6y ago
        The other thing people forget are means-tested aid programs each of which is seemingly designed without considering interactions with the other ones. There are various places in the 0-$40k income range where people face >100% marginal rates due to the combination of actual taxes and benefit phaseouts...
lotsofpulp 6y ago
> If you are a worker, it is not uncommon to pay over 40% of tax and if you work on your own small business you can pay even more and have very little left to reinvest. Not true according to this: https://files.taxfoundation.org/20200225094221/FF697-01.png https://files.taxfoundation.org/20200225094221/FF697-01.png https://taxfoundation.org/summary-of-the-latest-federal-income-tax-data-2020-update/ https://taxfoundation.org/summary-of-the-latest-federal-inco...
- varispeed 6y ago
  I am writing from European perspective, I should add that. However I read that in some states it is quite similar.
  - lotsofpulp 6y ago
    The linked article is referencing federal income tax in the US. If state and other local taxes need to be factored in, the situation becomes much more complex and almost impossible to compare.
nvarsj 6y ago
In pretty much every western European country your tax rates can easily hit 60%+ (like the 100k 60% cliff in the UK). The budgets of these governments are all largely funded on the backs of middle class income tax - 40% of all receipts in the UK, plus another 10-15% from VAT - compared to a lowly 9% from corporation tax [1]. You have to wonder how the economy can ever evolve given everything is geared towards suppressing middle class earners from ever having significant capital. 1: https://commonslibrary.parliament.uk/research-briefings/cbp-8513/ https://commonslibrary.parliament.uk/research-briefings/cbp-...
- verbify 6y ago
  The 60% effective tax rate is only on earnings between 100k and 125k, and only because of the loss of certain tax benefits. After 125k it drops back to 40%. It's really silly that it exists, but isn't representative of UK tax rates, it is just a weird side effect of the loss of the personal allowance. And I reckon most earning between 100k and 125k would avoid that 60% by contributing to their pension, so I don't think many are affected by it.
  - lotsofpulp 6y ago
    That’s the same kind of nuance which makes the linked article’s claim of 1% tax paid a non story (at least in the context of talking about Netflix specifically).
  - varispeed 6y ago
    If you make £60k before tax, your effective rate is still about 40% (if you add employer's NI which does not appear on payslips). Then you also have to add local taxes like council tax etc. It's not looking good. From tomorrow we are also going to get this - https://norightsemployee.uk/faq https://norightsemployee.uk/faq - workers on such contracts will have to factor employer's NI and apprenticeship levy in their rates.
  - drdec 6y ago
    Surely you mean marginal tax rates and not effective rates? Or is it true that at 124K you pay ~74K but at 126K you pay less, ~50K?
bbarnett 6y ago
Yes, but... Decades and decades ago, corporations paid most of the tax. People paid very little. Then things shifted. Instead of taxing corporations, people were taxed. Said people, with less money in their pocket, required raises. And so, over time, tax shifted from corporate to personal, but with people in the end taking home approximately as much as they had before. For example, you have $60k pretax, $50k take home. Tax rate goes up. You have less, demand a raise. You now make $65k pretax, yet have $50k take home. Of course, the numbers are merely there for example. Why all of this? Why a reduction on corporate taxes? Well, because now corporations can exist anywhere on the planet. If you tax a corporation too high, it can move, and you have nothing to tax. It used to be that this thing called 'tariffs' and 'duties' were an equalizing factor. If a car manufacturer moved off short to save corporate tax, why then you'd add import tariffs. The point being, the tariff was there to replace the lost corporate tax. Of course, tariffs are 'bad', and the goal of international trade now, seems to be to lift the third world out of poverty. Which is a laudable goal, however, with no import taxes on many things, and with corporations able to move at whim? You must keep corporate tax low, or you lose out to competing regions. This is doubly troublesome in a new economy, in which many goods are entirely virtual, and fly across borders on the Internet. Thus, taxes remain at the personal level -- for people cannot easily move. Right or wrong? Well, you have to get tax somewhere. And under the current model, it is hard to get it from corporations, squeeze too much, and they're gone. And this model is enabled by most 1st world governments world wide, which have decided that import tax, tariffs, are a bad thing. The only alternative to more corporate tax, and less personal tax, is to re-enact import taxes, duty, that sort of thing. Else, how do you prevent corporations from moving? Of course, it's not entirely as simple as all of this, but nothing at a 10000 foot view is. It's just an overview.
- tomrod 6y ago
  Flaw in argumemt: real wages not improving for several decades. Can you please provide sources where corporations were the primary tax vehicle?
  - bbarnett 6y ago
    See my reply to my original post. Tax rate changes are well known, but here's an example. Click on 'max' for a decades long look. https://tradingeconomics.com/canada/corporate-tax-rate https://tradingeconomics.com/canada/corporate-tax-rate In terms of 'real world' wages not improving, that's a somewhat arbitrary term. If you mean 'pre-tax', wages HAVE improved over time pre-tax. We're talking over 50+ years here. 'post-tax', they did improve, but that was before the great exodus of manufacturing overseas. Since that time, since 'free trade' was a 'good thing', they have fallen steadily.
throwaway2a02 6y ago
> tax progression will be removed, so that people will have a chance of levelling up Progressive taxation has the exact opposite function to what you're suggesting. It's a mechanism designed to reduce economic inequality and the poverty among the low income workers. Your comment sounds like a rationalization from a middle/upper income person. > it is not uncommon to pay over 40% of tax That figure is misleading, because it includes a set of expenses like social security, health insurance, government pension plans etc. Corporations don't pay that and that's why the difference may seems so big. But I too am quite unhappy with the way the whole taxation system is constructed. But I would go in the opposite direction to the one you described. More in the way to progressive taxation, even negative taxation for the very low income people, basic income. I would also work a bit towards making corporation pay more for all their externalities.
- hyko 6y ago
  It's a mechanism designed to reduce economic inequality Income inequality. Totally different thing; really wealthy people can play all sorts of games with income, so it’s not relevant to them. And that’s the way they like this debate framed: ignore their enormous piles of wealth and instead focus on the earnings distribution of ordinary people. If anything, it just stops you getting anywhere near to joining their ranks on an honest wage.
  - gbrindisi 6y ago
    Really wealthy people are probably not paying much income taxes to begin with
    - lr4444lr 6y ago
      That's his point. The income tax is not as effectively redistributive as a wealth tax would be.
    - sumtechguy 6y ago
      Let me introduce you to the HELOC. Wealthy people do not take out mortgages. They borrow cash against their existing wealth. They then buy things with that. Then pay back against the loan. Writing it off too (as per tax law). The 'rich' have sold everyone a bill of goods how they are redoing the tax system for 'the people'. When the reality is they are writing a bunch more exemptions for themselves. You can do the same thing. Many people when they figure it out 'level up'.
dpkrjb 6y ago
I remember reading that employment numbers is often a case big Corps make when they warrant dodging tax. “We employe X thousand people who contribute Y to the tax base so we really do pay tax”. It gets worse when you think about how few people technology companies really employ when compared to more traditional companies (Alphabet employs 130k, Walmart 2.2 million). They have annual profits of 40billion and ~4billion (2019) respectively. It’s bonkers that employing people is a good enough reason to warrant not paying tax.
- thejackgoode 6y ago
  I'm sure I just got hit by a not-so-new idea: to tax corporations on profit-per-employee basis. Automation tax, efficiency tax. Imagine the discourse!
- varispeed 6y ago
  To add to that - they essentially appropriate taxes workers pay as their own taxes - as if they owned the work that worker put their life into. This is insanely evil.
  - frockington1 6y ago
    Isn't an employment contract a worker entering an agreement to give work to an employer? Why is it evil for a corporation to own the work a worker is paid to do?
    - varispeed 6y ago
      I am sorry, I probably didn't word it too well. My point is that corporation may say that the tax a worker pays is actually their tax and they use that to justify why they pay next to no tax themselves. For example it is said that Amazon pays little tax in comparison to their profits and politicians use the argument that Amazon provide jobs and the workers pays tax, as if it was the Amazon who pays those taxes. Shifting the blame on the victim. One reason that workers pay so much tax is because corporations don't. Corporations then enjoy multi billion profits and workers barely can get by.
3pt14159 6y ago
> if you want to save for a deposit to buy a house, spend time on education and getting a better job, you'll get hit by much higher tax and it will take ages to save anything. I actually disagree. The issue isn't the tax rate, the issue is the arms races we have embedded all over our economy. Take housing, for example. No matter what you put as your tax rate the people in the region are going to compete for the limited amount of housing stock. The same is true for premier universities or top medical care. These arms races in our economies are eating up all the real productivity gains we've made in physical goods. If you compare the cost of a small home across time in something physical like eggs the cost has absolutely sky rocketed and it has nothing to do with tax. There are certain sectors of the economy that the market can't produce more of efficiently, like housing.
- varispeed 6y ago
  Higher tax bracket reduces the pool of people competing for properties in favour of people who already have money - from wealthy parents or their businesses, if they are lucky or depending how easily they can get a loan (here we have a plague of buy to let loans that let people with some money buy properties left and right) In my opinion housing here is artificially limited as it is over-regulated and you can't simply buy a land and build a house on it. All that combined it makes it accessible only for the rich and if you are from a poor background you are unlikely to join them because of numerous stops put in place.
LockAndLol 6y ago
Companies in the US are people until it comes to taxes, then all of a sudden they're not. There is a lot to fix...
macspoofing 6y ago
> If you are a worker, it is not uncommon to pay over 40% of tax and if you work on your own small business you can pay even more and have very little left to reinvest. First: "if you work on your own small business you can pay even more" ... huh? If you own a small business, you're getting the corporate tax rate, and chances are you're not paying much of taxes anyway because your net revenues probably are $0 or close to $0. What are you talking about here? Anyway, it's weird to state it as corporation vs worker with respect to tax rate. Those are different kinds of things. Every worker in a corporation pays personal income tax. Shareholders also pay taxes on capital gains and dividends. A corporations also pay plethora of other taxes (like payroll taxes). So let's not pretend there is no tax benefit to having corporations do business in your nation. The vast majority of corporations also have a profit margin in the range of 5%-10% - so it's not like you see crazy profits all over the place. And given the nature of a corporation and the role it plays, increasing taxes (to say, the level of personal income taxes) to fulfil the fantasies of anti-capitalists, will have disastrous effects on the wider economy of a nation because increasing cost of doing business will be passed down to consumers and workers and possibly lead to large-scale dissolution or abandonment of your region. The vaunted nordic countries opted for a model where personal income is taxed very high, but corporate income is taxed competitively (until the Trump tax cuts, Nordic corporate tax rates were universally lower than those of US). Finally, tax policy is an area replete with potential 'unintended consequences'. Most people (myself included and you as well - after reading your comment) don't really understand why everything is the way it is (and there are good reasons for many tax regulations), so I would be careful with advocating for restructuring the entire system - you're going to screw it up worse than you think it is now.
FpUser 6y ago
>"This is crazy how economy is tilted in favor of these big corporations." Corporations are allowed to bribe (sorry lobby) the government and many politicians end up on board of directors of the same corps after their marriage with the government is done away with. Do you really expect any different outcome in such conditions? In combination with this 2 major political parties ping pong I think the system is pretty much has reached an equilibrium point and nothing short of major turmoil is going to change anything. On top of that Covid 19 pretty much played to the advantage of big corporations annihilating many small businesses. Some big ones (hotel chains, aviation) got hit as well but they'll come back after a while. Small businesses however may not.
RHSeeger 6y ago
> Then you have progressive tax that is preventing you from saving much - if you want to save for a deposit to buy a house, spend time on education and getting a better job, you'll get hit by much higher tax and it will take ages to save anything. I'm having a hard time understanding the logic here. The government needs a certain amount of money to run [1]. If you make the tax rate flat then, in order to bring in the same amount of money, the lower incomes _must_ pay more taxes. While I'm open to an argument that this is false, I cannot come up with any way it could possibly be. As such, your argument seems to be > When a person makes over X amount of money, a progressive tax makes it hard for them to save any of that money over X because the amount they make over X is taxed higher. As such, we should tax earnings below X higher, so there's less of a jump. And that ^ argument makes no sense to me. [1] This is arguable, but it's fair to say that the amount the government needs is orthogonal to whether taxes are progressive or not.
lovetocode 6y ago
If you have a company, you can do this as well. This isn't unique to big corporations. This is why I went from sole proprietor -> llc -> s-corp. It took one successful year for me to figure this out. If you don't want to spend your income on taxes then reinvest into your business or donate to charities.
valuearb 6y ago
Investors almost always pay a minimum of 40% in taxes on earnings from their investments in corporations. First the corporation pays 20% (soon to be 28% again) on the profits. Then it pays state income taxes on the remaining profits (0-11%). Then the investor pays capital gains or dividend taxes (10-20%). Finally they pay their state taxes (0-12%).
- webinvest 6y ago
  The 10% capital gains tax rate is history. Now it’s been merged into the 15% bracket. To the rest of your comment: interesting point. I wonder if there’s a certain tax rate where it makes sense to change how you invest. Sort of like the difference in investing in Voyager digital (VYVGF) or the Voyager token (VGX). Stock buybacks are not tax deductible but buying a cryptocurrency can be a business expense. Last, I think the business tax rate hardly matters because so much can be written off and justified as business expenses. Just look at Amazon, Netflix and Tesla as examples. Amazon receives customer money before it has to pay suppliers. Thus, it can quickly go spend that surplus money on reinvesting into more distribution centers, better salaries, and automation until the taxable profit is $0.

tenaciousDaniel 6y ago

Yep. I just got an equity payout from an acquisition. It’s a lot of money, though it isn’t going to allow me to retire early. Would be enough for a house down payment, which is good enough for me! However, I am paying literally 40% in taxes due to how it was paid out. As someone who desperately needs this money, it’s devastating. To hear that large corps can weasel their way out of paying is extremely infuriating.

lotsofpulp 6y ago
How was it paid out that your federal income tax liability is 40% Or are you talking about withholding? Which is not accurate to describe as “taxes paid”. Also, if including state tax, then it might be higher, but I would still be surprised if your total tax liability was over 40%.
- sokoloff 6y ago
  They didn’t claim their federal tax liability was 40%; they claimed they were paying 40% total tax rate on the acquisition-related income, something which is true for most employees in most states for many acquisitions.
  - tenaciousDaniel 6y ago
    Yep, total tax rate.
  - lotsofpulp 6y ago
    I’m aware, but I don’t see how that has a relevance to discussion Netflix’s federal income tax liability. My point was people in these comments are throwing out personal tax liability figures for comparison including various things such as state taxes, social security, Medicare, which makes things not very comparable.
    - sokoloff 6y ago
      Because people are people and not math proof generation engines. Someone worked hard, achieved an intermediate goal that they hoped was going to move them one rung up the economic ladder only to find out that taxes took a much larger bite than they’d hoped or previously considered. So, they’re naturally discouraged to read about some big company somewhere paying a much lower overall rate while comparing it to their own. Perhaps the real question is why the authors of these articles don’t put everything into terms more directly relatable to the people reading the article? That’s because doing so makes for less outrage-sharing of the article.
- bzbarsky 6y ago
  If it's paid out as ordinary (W-2) income, then your top federal tax rate right this minute is 39.35% (37% regular tax, 1.45% medicare tax, 0.9% medicare surtax). If it's paid out as some sort of investment income not subject to long-term capital gains treatment (e.g. interest, non-qualified dividends), then your top federal rate is 40.8% (37% regular, 3.8% net investment tax). That does assume $500k of taxable income not counting the payout we're talking about here, to hit that 37% tax bracket. If you have kids, you can hit these sorts of marginal rates at lower incomes too, because of the 5% marginal tax rate from the child credit phaseout. I should note that money is fungible, so the fact that some of this is claimed to be "medicare" tax and some is claimed to be "income" tax is irrelevant to both the person paying the tax and the government collecting the tax. Medicare is not funded solely by the "medicare" tax in practice, so the fact that there's a separate tax is more or less an accounting oddity.
  - TuringNYC 6y ago
    >> If it's paid out as ordinary (W-2) income, then your top federal tax rate right this minute is 39.35% (37% regular tax, 1.45% medicare tax, 0.9% medicare surtax). There is also state tax, which can be significant (double digits), esp for top brackets.
    - bzbarsky 6y ago
      Indeed. That varies widely, though, and corporations are subject to it too, with its own weirdnesses, so I was trying to stick to apples-to-apples federal tax comparisons.
      - TuringNYC 6y ago
        I does vary widely, but the weighted majority of all such cases are in California (and NY might be next.) Those two states happen to have among the highest state taxes also. Consider this: Where were the last 20 major IPOs? The last 20 major acquisitions? Where were the founding teams (i.e., the ones with the most stock facing such issues.) ...I'll bet 80% or more of these were in CA. I'm only pointing this out because once you're a super-successful startup and you've gone thru all the steps for a successful liquidity event, there is the final bath of taxes :-/
pessimizer 6y ago
Needing the equity payment from your acquisition, untaxed, to put a down payment down on a house is not what the vast majority of people would think of as desperation. You're going to get enough tax breaks and subsidy for buying the house anyway.
- frankbreetz 6y ago
  What kind of tax breaks and subsidies are available for home buying?
  - frockington1 6y ago
    The big one is deducting interest paid. It greatly reduced the amount of money the government takes from me every year
ghufran_syed 6y ago
“small” corporations could do exactly the same - if you find employment easier than starting your own company and fighting to get customers, maybe everyone else does too? But if there is an economic benefit to people starting companies, shouldn’t tax policy also recognize that and try to make it easier? You never see headlines saying “$blahCo lost $400 million dollars of their own money last year, of which $50 million was taxes to the government and $300 million was payment to employees”. Doesn’t that suggest you’re only hearing one side of the story now?
darkarmani 6y ago
> However, I am paying literally 40% in taxes due to how it was paid out. As someone who desperately needs this money, it’s devastating. To hear that large corps can weasel their way out of paying is extremely infuriating. You can weasel out of it as well. You need to exercise your options at least a year before acquisition. Often you can do this even if you haven't vested the options yet.

cies 6y ago

Dont forget: consumers also pay the taxes of the companies as they are factored into the costs of products and services. What matters here is the relative incentive/disincentive that taxation signals. 40% on income from labour shows: dont get income from labour! Small percent on income from property (dividents, etc) show that that's the best place to get money from. Almost zero percent on pollution signals: go for it!

lotsofpulp 6y ago
What is the source for 40% tax on income for labor? https://www.irs.com/articles/2020-federal-tax-rates-brackets-standard-deductions/ https://www.irs.com/articles/2020-federal-tax-rates-brackets... If you’re adding state taxes, note that the linked article is discussing federal income taxes only. Even then, including state taxes does not get you to 40% for 99% of people.
- areyousure 6y ago
  For (single) self-employed people making between ~$85k and $137k, the marginal federal tax rate they face is a little under 40%, with 24% from your link, ~12% from Social security, and ~3% from Medicare. This excludes the effect of phaseouts of various deductions (eg, student loan interest), which can easily drive that higher while remaining within the context of federal taxation only.
  - drdec 6y ago
    Everybody forgets about Social Security and Medicare. Writing out the federal marginal rates for the different income brackets with SS and Medicare included is very eye-opening.
    - bzbarsky 6y ago
      The other thing people forget are means-tested aid programs each of which is seemingly designed without considering interactions with the other ones. There are various places in the 0-$40k income range where people face >100% marginal rates due to the combination of actual taxes and benefit phaseouts...

lotsofpulp 6y ago

> If you are a worker, it is not uncommon to pay over 40% of tax and if you work on your own small business you can pay even more and have very little left to reinvest. Not true according to this: https://files.taxfoundation.org/20200225094221/FF697-01.png https://files.taxfoundation.org/20200225094221/FF697-01.png https://taxfoundation.org/summary-of-the-latest-federal-income-tax-data-2020-update/ https://taxfoundation.org/summary-of-the-latest-federal-inco...

varispeed 6y ago
I am writing from European perspective, I should add that. However I read that in some states it is quite similar.
- lotsofpulp 6y ago
  The linked article is referencing federal income tax in the US. If state and other local taxes need to be factored in, the situation becomes much more complex and almost impossible to compare.

nvarsj 6y ago

In pretty much every western European country your tax rates can easily hit 60%+ (like the 100k 60% cliff in the UK). The budgets of these governments are all largely funded on the backs of middle class income tax - 40% of all receipts in the UK, plus another 10-15% from VAT - compared to a lowly 9% from corporation tax [1]. You have to wonder how the economy can ever evolve given everything is geared towards suppressing middle class earners from ever having significant capital. 1: https://commonslibrary.parliament.uk/research-briefings/cbp-8513/ https://commonslibrary.parliament.uk/research-briefings/cbp-...

verbify 6y ago
The 60% effective tax rate is only on earnings between 100k and 125k, and only because of the loss of certain tax benefits. After 125k it drops back to 40%. It's really silly that it exists, but isn't representative of UK tax rates, it is just a weird side effect of the loss of the personal allowance. And I reckon most earning between 100k and 125k would avoid that 60% by contributing to their pension, so I don't think many are affected by it.
- lotsofpulp 6y ago
  That’s the same kind of nuance which makes the linked article’s claim of 1% tax paid a non story (at least in the context of talking about Netflix specifically).
- varispeed 6y ago
  If you make £60k before tax, your effective rate is still about 40% (if you add employer's NI which does not appear on payslips). Then you also have to add local taxes like council tax etc. It's not looking good. From tomorrow we are also going to get this - https://norightsemployee.uk/faq https://norightsemployee.uk/faq - workers on such contracts will have to factor employer's NI and apprenticeship levy in their rates.
- drdec 6y ago
  Surely you mean marginal tax rates and not effective rates? Or is it true that at 124K you pay ~74K but at 126K you pay less, ~50K?

bbarnett 6y ago

Yes, but... Decades and decades ago, corporations paid most of the tax. People paid very little. Then things shifted. Instead of taxing corporations, people were taxed. Said people, with less money in their pocket, required raises. And so, over time, tax shifted from corporate to personal, but with people in the end taking home approximately as much as they had before. For example, you have $60k pretax, $50k take home. Tax rate goes up. You have less, demand a raise. You now make $65k pretax, yet have $50k take home. Of course, the numbers are merely there for example. Why all of this? Why a reduction on corporate taxes? Well, because now corporations can exist anywhere on the planet. If you tax a corporation too high, it can move, and you have nothing to tax. It used to be that this thing called 'tariffs' and 'duties' were an equalizing factor. If a car manufacturer moved off short to save corporate tax, why then you'd add import tariffs. The point being, the tariff was there to replace the lost corporate tax. Of course, tariffs are 'bad', and the goal of international trade now, seems to be to lift the third world out of poverty. Which is a laudable goal, however, with no import taxes on many things, and with corporations able to move at whim? You must keep corporate tax low, or you lose out to competing regions. This is doubly troublesome in a new economy, in which many goods are entirely virtual, and fly across borders on the Internet. Thus, taxes remain at the personal level -- for people cannot easily move. Right or wrong? Well, you have to get tax somewhere. And under the current model, it is hard to get it from corporations, squeeze too much, and they're gone. And this model is enabled by most 1st world governments world wide, which have decided that import tax, tariffs, are a bad thing. The only alternative to more corporate tax, and less personal tax, is to re-enact import taxes, duty, that sort of thing. Else, how do you prevent corporations from moving? Of course, it's not entirely as simple as all of this, but nothing at a 10000 foot view is. It's just an overview.

tomrod 6y ago
Flaw in argumemt: real wages not improving for several decades. Can you please provide sources where corporations were the primary tax vehicle?
- bbarnett 6y ago
  See my reply to my original post. Tax rate changes are well known, but here's an example. Click on 'max' for a decades long look. https://tradingeconomics.com/canada/corporate-tax-rate https://tradingeconomics.com/canada/corporate-tax-rate In terms of 'real world' wages not improving, that's a somewhat arbitrary term. If you mean 'pre-tax', wages HAVE improved over time pre-tax. We're talking over 50+ years here. 'post-tax', they did improve, but that was before the great exodus of manufacturing overseas. Since that time, since 'free trade' was a 'good thing', they have fallen steadily.

throwaway2a02 6y ago

> tax progression will be removed, so that people will have a chance of levelling up Progressive taxation has the exact opposite function to what you're suggesting. It's a mechanism designed to reduce economic inequality and the poverty among the low income workers. Your comment sounds like a rationalization from a middle/upper income person. > it is not uncommon to pay over 40% of tax That figure is misleading, because it includes a set of expenses like social security, health insurance, government pension plans etc. Corporations don't pay that and that's why the difference may seems so big. But I too am quite unhappy with the way the whole taxation system is constructed. But I would go in the opposite direction to the one you described. More in the way to progressive taxation, even negative taxation for the very low income people, basic income. I would also work a bit towards making corporation pay more for all their externalities.

hyko 6y ago
It's a mechanism designed to reduce economic inequality Income inequality. Totally different thing; really wealthy people can play all sorts of games with income, so it’s not relevant to them. And that’s the way they like this debate framed: ignore their enormous piles of wealth and instead focus on the earnings distribution of ordinary people. If anything, it just stops you getting anywhere near to joining their ranks on an honest wage.
- gbrindisi 6y ago
  Really wealthy people are probably not paying much income taxes to begin with
  - lr4444lr 6y ago
    That's his point. The income tax is not as effectively redistributive as a wealth tax would be.
  - sumtechguy 6y ago
    Let me introduce you to the HELOC. Wealthy people do not take out mortgages. They borrow cash against their existing wealth. They then buy things with that. Then pay back against the loan. Writing it off too (as per tax law). The 'rich' have sold everyone a bill of goods how they are redoing the tax system for 'the people'. When the reality is they are writing a bunch more exemptions for themselves. You can do the same thing. Many people when they figure it out 'level up'.

dpkrjb 6y ago

I remember reading that employment numbers is often a case big Corps make when they warrant dodging tax. “We employe X thousand people who contribute Y to the tax base so we really do pay tax”. It gets worse when you think about how few people technology companies really employ when compared to more traditional companies (Alphabet employs 130k, Walmart 2.2 million). They have annual profits of 40billion and ~4billion (2019) respectively. It’s bonkers that employing people is a good enough reason to warrant not paying tax.

thejackgoode 6y ago
I'm sure I just got hit by a not-so-new idea: to tax corporations on profit-per-employee basis. Automation tax, efficiency tax. Imagine the discourse!
varispeed 6y ago
To add to that - they essentially appropriate taxes workers pay as their own taxes - as if they owned the work that worker put their life into. This is insanely evil.
- frockington1 6y ago
  Isn't an employment contract a worker entering an agreement to give work to an employer? Why is it evil for a corporation to own the work a worker is paid to do?
  - varispeed 6y ago
    I am sorry, I probably didn't word it too well. My point is that corporation may say that the tax a worker pays is actually their tax and they use that to justify why they pay next to no tax themselves. For example it is said that Amazon pays little tax in comparison to their profits and politicians use the argument that Amazon provide jobs and the workers pays tax, as if it was the Amazon who pays those taxes. Shifting the blame on the victim. One reason that workers pay so much tax is because corporations don't. Corporations then enjoy multi billion profits and workers barely can get by.

3pt14159 6y ago

> if you want to save for a deposit to buy a house, spend time on education and getting a better job, you'll get hit by much higher tax and it will take ages to save anything. I actually disagree. The issue isn't the tax rate, the issue is the arms races we have embedded all over our economy. Take housing, for example. No matter what you put as your tax rate the people in the region are going to compete for the limited amount of housing stock. The same is true for premier universities or top medical care. These arms races in our economies are eating up all the real productivity gains we've made in physical goods. If you compare the cost of a small home across time in something physical like eggs the cost has absolutely sky rocketed and it has nothing to do with tax. There are certain sectors of the economy that the market can't produce more of efficiently, like housing.

varispeed 6y ago
Higher tax bracket reduces the pool of people competing for properties in favour of people who already have money - from wealthy parents or their businesses, if they are lucky or depending how easily they can get a loan (here we have a plague of buy to let loans that let people with some money buy properties left and right) In my opinion housing here is artificially limited as it is over-regulated and you can't simply buy a land and build a house on it. All that combined it makes it accessible only for the rich and if you are from a poor background you are unlikely to join them because of numerous stops put in place.

LockAndLol 6y ago

Companies in the US are people until it comes to taxes, then all of a sudden they're not. There is a lot to fix...

macspoofing 6y ago

> If you are a worker, it is not uncommon to pay over 40% of tax and if you work on your own small business you can pay even more and have very little left to reinvest. First: "if you work on your own small business you can pay even more" ... huh? If you own a small business, you're getting the corporate tax rate, and chances are you're not paying much of taxes anyway because your net revenues probably are $0 or close to $0. What are you talking about here? Anyway, it's weird to state it as corporation vs worker with respect to tax rate. Those are different kinds of things. Every worker in a corporation pays personal income tax. Shareholders also pay taxes on capital gains and dividends. A corporations also pay plethora of other taxes (like payroll taxes). So let's not pretend there is no tax benefit to having corporations do business in your nation. The vast majority of corporations also have a profit margin in the range of 5%-10% - so it's not like you see crazy profits all over the place. And given the nature of a corporation and the role it plays, increasing taxes (to say, the level of personal income taxes) to fulfil the fantasies of anti-capitalists, will have disastrous effects on the wider economy of a nation because increasing cost of doing business will be passed down to consumers and workers and possibly lead to large-scale dissolution or abandonment of your region. The vaunted nordic countries opted for a model where personal income is taxed very high, but corporate income is taxed competitively (until the Trump tax cuts, Nordic corporate tax rates were universally lower than those of US). Finally, tax policy is an area replete with potential 'unintended consequences'. Most people (myself included and you as well - after reading your comment) don't really understand why everything is the way it is (and there are good reasons for many tax regulations), so I would be careful with advocating for restructuring the entire system - you're going to screw it up worse than you think it is now.

FpUser 6y ago

>"This is crazy how economy is tilted in favor of these big corporations." Corporations are allowed to bribe (sorry lobby) the government and many politicians end up on board of directors of the same corps after their marriage with the government is done away with. Do you really expect any different outcome in such conditions? In combination with this 2 major political parties ping pong I think the system is pretty much has reached an equilibrium point and nothing short of major turmoil is going to change anything. On top of that Covid 19 pretty much played to the advantage of big corporations annihilating many small businesses. Some big ones (hotel chains, aviation) got hit as well but they'll come back after a while. Small businesses however may not.

RHSeeger 6y ago

> Then you have progressive tax that is preventing you from saving much - if you want to save for a deposit to buy a house, spend time on education and getting a better job, you'll get hit by much higher tax and it will take ages to save anything. I'm having a hard time understanding the logic here. The government needs a certain amount of money to run [1]. If you make the tax rate flat then, in order to bring in the same amount of money, the lower incomes _must_ pay more taxes. While I'm open to an argument that this is false, I cannot come up with any way it could possibly be. As such, your argument seems to be > When a person makes over X amount of money, a progressive tax makes it hard for them to save any of that money over X because the amount they make over X is taxed higher. As such, we should tax earnings below X higher, so there's less of a jump. And that ^ argument makes no sense to me. [1] This is arguable, but it's fair to say that the amount the government needs is orthogonal to whether taxes are progressive or not.

lovetocode 6y ago

If you have a company, you can do this as well. This isn't unique to big corporations. This is why I went from sole proprietor -> llc -> s-corp. It took one successful year for me to figure this out. If you don't want to spend your income on taxes then reinvest into your business or donate to charities.

valuearb 6y ago

Investors almost always pay a minimum of 40% in taxes on earnings from their investments in corporations. First the corporation pays 20% (soon to be 28% again) on the profits. Then it pays state income taxes on the remaining profits (0-11%). Then the investor pays capital gains or dividend taxes (10-20%). Finally they pay their state taxes (0-12%).

webinvest 6y ago
The 10% capital gains tax rate is history. Now it’s been merged into the 15% bracket. To the rest of your comment: interesting point. I wonder if there’s a certain tax rate where it makes sense to change how you invest. Sort of like the difference in investing in Voyager digital (VYVGF) or the Voyager token (VGX). Stock buybacks are not tax deductible but buying a cryptocurrency can be a business expense. Last, I think the business tax rate hardly matters because so much can be written off and justified as business expenses. Just look at Amazon, Netflix and Tesla as examples. Amazon receives customer money before it has to pay suppliers. Thus, it can quickly go spend that surplus money on reinvesting into more distribution centers, better salaries, and automation until the taxable profit is $0.