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Quick look at US federal receipts
Looking at historical data always gives a great sense of perspective (in this case, table 2.1 from the White House site). The graphic below represents the remarkable increase in spread between individuals and corporations when it comes to the burden of funding the federal government. This doesn't include other sources like social security payments, excise taxes and other sources - just plain consumers and businesses, Econ 101.
There are numerous points to take away but we want to highlight a couple:
- the individual curve is roughly parabolic while the corporate curve is roughly linear - painfully obvious but attempting to diagnose acts almost like an economic Rorschach test... give it a shot in the comments, see what comes out!
- the only dips in individual income tax burdens have come during the reign of W - other downturns have merely seen a flattening
- the hump in corporate income tax from 2003-2009 is almost comical as a representation of the effects of a leveraging bubble
-given that 2010 forward numbers are (obviously) forecasts, it is pretty clear that there is some combination of excessive economic optimism from the current administration, knowingly inflating the data a la the Chinese, or some tax hikes even while Obama champions to reduce the tax burden of the bottom 40% of the income range
Edit: ignore the TQ downswing in the mid 70s - some bad data in the federal data set... if you remove that datapoint, it smooths out nicely.
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US Population growth has been roughly linear, approximating the corporate line above. So the blue line does not at all correlate with population growth. And the graph starts after the 1913 Constitutional Amendment establishing an income tax, so that doesn't seem relevant. Finally, the average income of the US household has risen from $15K to around $49K over the same time period, but this still doesn't cause a line with slope like the one in blue. Controlling for all of these variables, I suspect it will be simply a matter of increasing tax rates on individuals versus fairly constant tax rates on corporations over the same time period.
Guess who has the power in this democracy...
The effective tax rate (ie. cash taxes) of corporations in America is notoriously surprisingly low. For example, GE’s effective tax rate was 24.9% in 2008, 21.8% in 2007 and 21.9% in 2006. (Source: 2008 10k).
There was a great article in Bloomberg markets magazine about this called "Uncle Sam Bails out Capital Morgan." http://www.bloomberg.com/news/marketsmag/mm_0809_story1.html. Yes we certainly do know who has the power in this democracy...
Perhaps the bigger problem I see as a tax payer though is the narrowing percentage of individuals who pay the majority of the income taxes in this country. It's unsustainable.
Has anyone ever stopped to wonder why a Constitutional amendment was made to foist an income tax upon the people of America? Isn't that an administrative procedure? Why indoctrinate it in our holy documents?
Hello?
Massah's getting pissed. You niggers best get back out in the fields and pick that god damn cotton before a whippin is administered.
I am Chumbawamba, and you are taxpayers and consumers.
Thirty-nine anagrams for Chumbawamba:
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Now that's pseudo anonymity.
Wow. Just, wow.
Sorry, I can't do much with wow: It's a bleeding palindrome.
Oww!
Is that a word? OK.
And yet the constant banter on CNBC is how over-taxed businesses in America are.
If the costs to collect, report and pay the taxes by businesses and individuals is added to the actual tax paid, then I suspect the curves as a "tax burden" might be closer to each other.
The corporates are a lot more successful in keeping their tax contributions under control. Money talks. That's the only take away I get from that graph. What's interesting is the anti-tax rhetoric they use in public discourse, aided by talking heads from the Cato Institute and the AEI, plus the US Chamber of Commerce, etc.
what about adjusting the graph for inflation (past and expected)?
i was thinking the same thing. given the dollar won't be worth shit in a few years, after the Chinese start sending them back in airplanes to buy any hard asset they can at whatever price they can get, the graph might actually start going down.
Why? The point is to compare the tax burden between individuals and corporates. Adjusting for inflation does nothing to change the basic relationship.
Holy crap the graph ends in 1984. It's like Orwellian or something. Or maybe just covered by the Latest News From RAN Squawk. I am going with Orwellian.
Some animals are more equal than others.
The graph goes up to 2014. You need to maximize your page size. That's why the graph is being cut off at 1984.
Good to know that the world doesn't end on 2012 then.
We know that now because the White House already has the economic data all through 2014. That's a nice five year plan.
Corporations are tax collectors not taxpayers.
Taxing the man behind the tree instead of me
and thee is just shady monkey business.
I have nothing to do with finance,banking,etc. But in University they taught us economics with the Rational Expectations Hypothesis as the model (amongst others). The Professors told us that you cannot make profits in real estate ownership or in stocks based on this Rational Expectations Hypothesis. So real estate, its derivatives, every wall street firm, aig, most real estate banks, are all bust. My question is: did these people attend University? If so, were they cracked-out, drunkards? If they were aware of these concepts, then they all engaged in fraud. Which is actually a bigger problem in America.
Cornelius, tell Mr. Durden that you need a re-sizer plugin to fix your images.
Taxes? Ha. Only aSsHoLeS and perverts pay taxes to a corrupt regime. Why don't you go stuff the equivalent of your "tax liability" up your ass? It's more direct than taking it from the government after you've paid them to do so.
I am Chumbawamba.
aha,
chumbawamba is actually Little Timmy Geithner in blackface. busted.
Could anyone be more corrupt or feebleminded than this jackal Krugman?
As soon as the Obama administration-in-waiting announced its stimulus plan — this was before Inauguration Day — some of us worried that the plan would prove inadequate. And we also worried that it might be hard, as a political matter, to come back for another round.
Blog: The Conscience of a Liberal
Unfortunately, those worries have proved justified. The bad employment report for June made it clear that the stimulus was, indeed, too small. But it also damaged the credibility of the administration’s economic stewardship. There’s now a real risk that President Obama will find himself caught in a political-economic trap.
I’ll talk about that trap, and how he can escape it, in a moment. First, however, let me step back and ask how concerned citizens should be reacting to the disappointing economic news. Should we be patient and give the Obama plan time to work? Should we call for bigger, bolder actions? Or should we declare the plan a failure and demand that the administration call the whole thing off?
Before you answer, consider what happens in normal times.
When there’s an ordinary, garden-variety recession, the job of fighting that recession is assigned to the Federal Reserve. The Fed responds by cutting interest rates in an incremental fashion. Reducing rates a bit at a time, it keeps cutting until the economy turns around. At times it pauses to assess the effects of its work; if the economy is still weak, the cutting resumes.
During the last recession, the Fed repeatedly cut rates as the slump deepened — 11 times over the course of 2001. Then, amid early signs of recovery, it paused, giving the rate cuts time to work. When it became clear that the economy still wasn’t growing fast enough to create jobs, more rate cuts followed.
Normally, then, we expect policy makers to respond to bad job numbers with a combination of patience and resolve. They should give existing policies time to work, but they should also consider making those policies stronger.
And that’s what the Obama administration should be doing right now with its fiscal stimulus. (It’s important to remember that the stimulus was necessary because the Fed, having cut rates all the way to zero, has run out of ammunition to fight this slump.) That is, policy makers should stay calm in the face of disappointing early results, recognizing that the plan will take time to deliver its full benefit. But they should also be prepared to add to the stimulus now that it’s clear that the first round wasn’t big enough.
Unfortunately, the politics of fiscal policy are very different from the politics of monetary policy. For the past 30 years, we’ve been told that government spending is bad, and conservative opposition to fiscal stimulus (which might make people think better of government) has been bitter and unrelenting even in the face of the worst slump since the Great Depression. Predictably, then, Republicans — and some Democrats — have treated any bad news as evidence of failure, rather than as a reason to make the policy stronger.
Hence the danger that the Obama administration will find itself caught in a political-economic trap, in which the very weakness of the economy undermines the administration’s ability to respond effectively.
As I said, I was afraid this would happen. But that’s water under the bridge. The question is what the president and his economic team should do now.
It’s perfectly O.K. for the administration to defend what it’s done so far. It’s fine to have Vice President Joseph Biden touring the country, highlighting the many good things the stimulus money is doing.
It’s also reasonable for administration economists to call for patience, and point out, correctly, that the stimulus was never expected to have its full impact this summer, or even this year.
But there’s a difference between defending what you’ve done so far and being defensive. It was disturbing when President Obama walked back Mr. Biden’s admission that the administration “misread” the economy, declaring that “there’s nothing we would have done differently.” There was a whiff of the Bush infallibility complex in that remark, a hint that the current administration might share some of its predecessor’s inability to admit mistakes. And that’s an attitude neither Mr. Obama nor the country can afford.
What Mr. Obama needs to do is level with the American people. He needs to admit that he may not have done enough on the first try. He needs to remind the country that he’s trying to steer the country through a severe economic storm, and that some course adjustments — including, quite possibly, another round of stimulus — may be necessary.
What he needs, in short, is to do for economic policy what he’s already done for race relations and foreign policy — talk to Americans like adults.
Wall of text. Hard to read. Paragraphs please. End.
Aren't we overlooking something fundamental about corporate taxation? It's redundant with personal taxation...
In other words, corporations are taxed on their profits... eventually, the profits of every corporation trickle down to shareholders/owners as the company deems fit and/or as laws require. When the shareholder receives the distribution, he or she is also taxed. Depending on the type of distribution, the tax rate changes.
Point being... why would we want double taxation? Is that fundamentally fair?
Further, american corporations don't exist in a vacuum... we have a world economy... and, as a result, I think it's a very fair argument to say that should the corporate tax rate rise high enough (all things considered), american corporations can easily jump ship and relocate and not miss a beat.
Again, why would we want double taxation? Is that economically feasible?
Is a gap between personal and corporate taxation a bad thing? Is equity theory reeling us in and causing us to miss the real point? I.e. that corporate taxation (and in many instances personal taxation) is total bullshit from inception? (from both a fundamental fairness notion as well as a strategic directive).
When the shareholder receives the distribution, he or she is also taxed.
You are somehow imagining that there is an abundance of shareholders in the middle class. This is not the case. Even less so today than 10 years ago.
The 'light touch' version capitalism (ex. GWB administration) does not create or sustain a healthy middle class. It supports a mostly mature markets model where most markets are monopolies, oligopolies or duopolies. That's not a slight to GWB per se, but how unfettered capitalism works.
One probable conclusion to your scenario then is the few taxpayers left go back to congress and legislate fewer taxes on themselves and then expatriate after starving the government all the while blaming others for the percieved decline in their country.
No, I don't care how many shareholders there are in any class... it's immaterial. I'm not sure humans have ever correctly implemented an economic model that sustains a healthy middle class (see the exponential growth model everyone likes to talk about on here)... so I'm not sure where you're going with that one...
The point is that the same taxation could be made via mechanisms already present in the system... which is why we're going to collapse under our own bureaucratic weight... why cause the inefficiency of taxing money twice when the end result can be achieved through a higher marginal rate for the top tiers of individuals?
In addition, like double jeopardy, double taxation is universally frowned upon... think used cars. Death and taxes right?
The other issue is, how do we STRATEGICALLY implement our tax system? Isn't this at least in part what the laffer curve is all about?
You presume that we get something for taxation... that we have any "representation" for our taxation even... or that the government will actually do something worthwhile with it... e.g. continue shelling it out to failed institutions, whether it be education, healthcare, or general motors. The decline in our country isn't caused by the implementation of our tax system... our problems are much more fundamental...
I want to take a shot at the declines under GW. The rationale for the argument that fewer taxes leads to a more prosperous economy appears to be an epic fail. The fail is in broad terms, just like the graph.
BTW, I'm not passively endorsing higher tax rates. There are practical limits on either end of tax rates. Please don't whip out your least favorite gov't benefits program as a rationalization for smaller gov't.
Comments?
Off topic: I'm glad you posted this. The GS conspiracy stories were getting ridiculous
Learn the difference between tax rates and collections. Also recall that the world existed before GW. The reduction of tax rates in the 80's lead to an increase in total collections and GDP growth.
Agreed on the GS has conspiracy. The stretching is growing tiresome.
I frankly really like the estimated line. Maybe China is going to lend Obomba some of its magic 8% GDP powder.
Corporations have a systematic advantage over citizens in economic competition. This despite the fact that government creates corporations. Also despite the fact that government, especially in Americas case, was created to serve people. Corporations were not thought of in the constitution and never mentioned in it.
Corporations are complex abstractions. People are not. In any debate therefore corporations will always win.
Corporations are inseparable from government in the US and Europe. There is no changing that. The corporation is a superior organizational model which is superseding government. Again, the complex abstraction comes to the fore. Government creates corporations yet are dominated by their creation. Few grasp that corporations therefore are the government. The new world order.