Corporate Income Taxes

Posted: September 17, 2008 in Economy

I’m going to spend some time over the next few week really going through this site (taxfoundation.org).
Both sides are ratcheting up the rhetoric on how they are going to lower your taxes.

The current budget debate in the state of California is a microcosm of the current “whose gonna cut your taxes the most” staring match between Obama and McCain. The Republicans want to lower taxes and Democrats want to continue to expand government. The only problem here is–YOU CAN’T DO BOTH!

Any candidate that says they are going to lower your taxes while at the same time promising a whole round of new programs to address certain issues is doing nothing but digging a hole to fill another.

Moving on….

Taxfoundation.org talks a little bit about corporate taxes and who pays them.

What Do Corporate Income Taxes Cost American Families?

Ask a typical family about the taxes they pay, and they’ll likely focus on America’s biggest and most visible taxes: property taxes at home, sales taxes at the store, and income
and payroll taxes deducted from their paychecks at work.

One tax they’re likely to ignore is the corporate income tax. And the reason is simple: most who pay corporate income taxes aren’t even aware that they exist. But although corporate taxes are invisible to the average taxpayer, they quietly tap family pocketbooks for nearly $370 billion per year in the form of higher prices, lower wages and poorer returns on investments.

“Most people think corporate income taxes are paid by wealthy, anonymous companies,” said Scott Hodge, President of the Tax Foundation. “But as economists have been teaching for centuries, people bear the burden of corporate taxes, not companies.”

[…]

Only Payroll Taxes Hit Poor Harder

One of the most surprising findings from the Tax Foundation study is that the lowest-income households bear a large share of the corporate tax burden.

In total, the poorest 20 percent of households pay more in corporate income taxes each year than they pay in individual income taxes to the IRS each April. Households earning under $23,700 in 2004 paid $271 in corporate income taxes, compared to just $171 in individual income taxes.

As a share of their total tax burden, corporate taxes were 6.3 percent of low-income households’ tax bills compared to just 4 percent for individual income taxes. The only tax that hits low-income families harder than corporate taxes is the federal payroll tax, which is designed to pay for
Social Security and Medicare.

“What this means is that cutting corporate tax rates is not about handing money to U.S. companies,” said Hodge. “It is about providing tax relief to American families, much of which will provide enormous benefits to the nation’s lowest-income wage earners.” (more…pdf)

Related: “American Families Bear Large Burden from Corporate Income Tax”

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