Tax Reform is all the rage. And, now that the fairy-tale land of budget reconciliation has terminated (it ended on 30 September, where items could pass with a simple majority- which means the Vice President could break any ties), our Congress will now get all hyped about lowering the tax burden (I fear they will offer the rich a tax break, the poor more taxes, the middle class empty promises, and Christmas gifts for big business. We’ll have to see what they really propose.)
So, before my children (and grandchild) woke up on the first day of Passover (the seder ends pretty late), I was reading my Washington Post and drinking my coffee. (I had already finished the NY Times and the Wall Street Journal.) And, then I read the piece by Catherine Rampell. I could not let it sit unanswered- but since it was the first days of Passover, I had to wait until the intermediate days to respond.
So, we’ve talked (this is the 3rd part in the daily series about current economics) about who is funding the US treasury. Mostly workers, which surprised most of you. Mostly the poor and the middle class, which clearly confounded you. (Remember- it’s payroll taxes that provide about 45% of the federal take, and the income taxes of the non-rich provide another 15% of the federal take. The rich (top 10%) provide 30% of the annual federal receipts via income taxes and corporations finish off the totals by contributing about 10%.)
Soooo. You’ve heard it. You know it. Corporations all complain about that 35% tax rate- but few, if any, are paying taxes at that rate. Big companies pay virtually ZERO % and middle-market companies pay 15 to 18%. (By the way, a whole slew of single-owner corporations pay a mandated 35% tax rate!) And, our clients- the ones we convinced to form LLC’s and S entities to save on taxes want us to explain how come they are not paying taxes at the 15% to 18% rates. Continue reading Tax Rates- Pass Throughs and C’s