Marginal Tax Rates & The Corporate Tax Rate

[brencat]

For a while now, I have been wondering why no politician from either party has proposed establishing additional marginal tax rates above the much argued $250k threshold. As many of you from the NY-NJ-CT and also CA-FL areas know, $250k here is comfortable but hardly rich given these states' high cost of living. Given our country's financial situation, I'm convinced more than ever that our tax policy on a corporate and individual level needs major adjustment. So I propose we think about the following:

Cutting the Corp tax rate from 35% to 22-25% range, and close the loopholes that permit companies to HQ offshore and play all the games they play with establishing foreign subs to lower their total tax bill. Grant a 6 month repatriation holiday to help bring back all the money corporations keep in foreign subs to be taxed going forward at the new lower rate. Advertise to the world the U.S. is open for business via a lower corporate tax rate that is more inline with the rest of the world (avg ~ 18.2%).

Now the hard part - individual taxation and marginal rates. The last 15 years of exhorbitant CEO pay, professional athlete pay, golden parachutes, etc. cannot and will not change without tax policy that discourages such behavior. Meanwhile, as I stated earlier, the magical $250k threshold that Obama likes to tout as the cutoff where one is suddenly "rich" is a joke to people like me from NJ. Therefore, I propose the following new marginal rates:

The top marginal rate of $250k+ taxed at 35% (soon to revert to 39.6%) be REDUCED to ~ 30-32%, and at least 5-6 NEW marginal rates above that level be established. Starting at $500k up to $750k the rate will be 36%, from $750-$1.25M a rate of 40%, from $1.25-$1.75M 42%, $1.75M-$3M 45%, $3M-$5M 47%, and $5M+ at 55%. Finally, to address the idle rich, I propose some type of phase out of favorable cap gains rates for earners starting at $5M and by $15M in annual income. This will ensure the top 400 families who currently get 81% of their annual income from investments vs an actual job pay closer to an effective 30-35% all in tax rate as opposed to the current 16.7% effective rate.

In my view, the above proposals will help correct the massive imbalance over time between CEO pay and base worker pay that currently exists, while also shielding much of the middle & upper middle class in high cost states up to a very comfortable income level. Meanwhile, Mark "Turd", public company CEOs, and Paris Hilton can pay 55% over $5 mil.

There is no way a company is going to continuing paying a CEO $30 mil/yr when $25 mil of it will be taxed at 55%. The same thing happened in reverse when Bush cut the cap gains rate on dividends...companies increased payouts when they knew 39% wasn't going to the govt (and they will reverse that policy if the 15% rate is allowed to revert again). Note that I have not done any testing on these proposed thresholds in terms of likely increases/decreases in tax revenue and economic activity so no flames on this point please.

Feedback welcome.

 

[Phokus]

Additional suggestion: send the assholes who evade taxes via swiss bank accounts or whatever to GITMO.

 

[Phokus]

Also, raise estate taxes and get rid of using trusts as a loophole around it, even many of the super rich agree. We have enough of a fucked up aristocracy in this country we don't need more.

 

[EagleKeeper]

Additional suggestion: send the assholes who evade taxes via swiss bank accounts or whatever to GITMO.

GITMO was promised to be closed

 

[SammyJr]

I think you have good ideas. There probably doesn't need to be so many brackets at the top. I'd say 50% at $1 million, then 60% at $5 million. I think that capital gains should be taxed as normal income with exceptions made for retirees selling less than $250k/year in stocks/mutual funds/etc.

I am in favor of marginal brackets for corporate income tax. These brackets would be based on the ratio between revenue from sales vs. the payroll of full time, living wage, nonmanagement American workers. If a company is just a shell with huge revenues and a marginal staff, they pay out the ass. If they're American as Apple Pie, employ almost an entirely American staff, then they pay no corporate taxes.

 

[Phokus]

What's the over/under on the number of posts before some libertarian/republican dingbat suggests 'flat tax/fair tax/sales tax only/no tax'?

 

[Phokus]

GITMO was promised to be closed

psst, i was being facetious

 

[brencat]

What's the over/under on the number of posts before some libertarian/republican dingbat suggests 'flat tax/fair tax/sales tax only/no tax'?

FYI, I think you may know I fancy myself an economic conservative. But I always try to be fair and reasonable with most things. The flat tax is simply a joke, and I can't take any politician or economist who even entertains such a theory seriously.

It's really not very complicated. Tax policy can be used quite effectively to encourage/discourage certain behaviors if also used SMARTLY. I think that is the key. Not trying to discourage business creation or punish people. Just trying to return some sense of balance to our system because it is so fvcked right now and nobody is thinking critically about what really needs to be done.

 

[jackace]

FYI, I think you may know I fancy myself an economic conservative. But I always try to be fair and reasonable with most things. The flat tax is simply a joke, and I can't take any politician or economist who even entertains such a theory seriously.

It's really not very complicated. Tax policy can be used quite effectively to encourage/discourage certain behaviors if also used SMARTLY. I think that is the key. Not trying to discourage business creation or punish people. Just trying to return some sense of balance to our system because it is so fvcked right now and nobody is thinking critically about what really needs to be done.

I can agree with this 100%. I have always considered taxes more than just a revenue source for the government.

 

[WackyDan]

Problem with taxing the highest brackets at 40 to 50% is that you'll only push their incomes and perks they get from board of directors even higher.

That 40 to 50% federal tax... You are forgetting that most pay a state income tax and some pay income tax to the city they live in. ie; NYC Considering those taxes, and localized taxes we pay on everything we buy or property, a 50% rate for federal alone seems high.


While I think you are correct in wanting addition brackets for incomes well over 250k+ per year, I think you forget one thing... You could tax the rich at 100% and still not solve the fiscal problems of this country, or balance the budget with that rate.

There are a lot of Americans who pay no Federal income tax at all. I'm not talking about the homeless, though if you have next to no income you actually can still get a return from the us gov't that is more than you paid in taxes. WTF.

Point is, there are plenty of people making below the median income that pay no federal income taxes at all. We need to address this. So I counter that we should have tax brackets that are even lower as well. Remove a lot of the loopholes for those in the lower income range to prevent the free handouts, but tax someone who isn't paying any federal income taxes at all a small minimal rate. Add a 5%, 10% bracket. These are the people who consume the most of federal and local social services, and should be expected to pay a small share.

 

[Mursilis]

What's the over/under on the number of posts before some libertarian/republican dingbat suggests 'flat tax/fair tax/sales tax only/no tax'?

Probably less than the over/under of you trolling this thread. Oops, too late!!

 

[Mursilis]

Starting at $500k up to $750k the rate will be 36%, from $750-$1.25M a rate of 40%, from $1.25-$1.75M 42%, $1.75M-$3M 45%, $3M-$5M 47%, and $5M+ at 55%. Finally, to address the idle rich, I propose some type of phase out of favorable cap gains rates for earners starting at $5M and by $15M in annual income. This will ensure the top 400 families who currently get 81% of their annual income from investments vs an actual job pay closer to an effective 30-35% all in tax rate as opposed to the current 16.7% effective rate.

Sounds good so far. Watching the explosion of CEO/banker salaries (despite many of these companies struggling/failing!!) in the recent years has really made me rethink higher-tier tax rates.

 

[brencat]

There are a lot of Americans who pay no Federal income tax at all. I'm not talking about the homeless, though if you have next to no income you actually can still get a return from the us gov't that is more than you paid in taxes. WTF.

These are the people who consume the most of federal and local social services, and should be expected to pay a small share.

I have no problem with that. If there is anyone in our govt brave enough to entertain a serious comprehensive overhaul of corporate and individual tax rates, I am certainly for MORE, not less marginal thresholds. And I don't think it's unreasonable to charge a small percentage at the low end to control the freeloaders either.

 

[Phokus]

Probably less than the over/under of you trolling this thread. Oops, too late!!

Yes, clearly those are suggestions that are never mentioned by conservatives or only the fringe group of conservatives.

 

[JS80]

Additional suggestion: send the assholes who evade taxes via swiss bank accounts or whatever to GITMO.

Only if you agree to send the assholes who are on welfare and medicaid to GITMO.

 

[piasabird]

I would even have a lower capital gains tax if you make less than say 100,000. There are a lot of people managing their own retirement money.

What you have to realize is that everyone's IRA and retirement money is often invested in corporate funds. So if they pay more they have less for retirement. This increases the pain significantly.

Keeping a lower tax rate, does make some people richer. However, if the USA has a lower tax rate than say the EU, Japan, or other locations, then rich people will want to move here. Rich people are the ones paying the taxes and spending the money and hiring people.

 

[brencat]

Thanks for the replies so far gang. Bumping this thread since there is a raging discussion going on right now about a payroll tax holiday.

 

[PokerGuy]

So, your solution to the spending problem is... tax the rich? Now there's a novel idea!

 

[SammyJr]

So, your solution to the spending problem is... tax the rich? Now there's a novel idea!

Well, someone has to pay for our massive military budget and corporate welfare. Might as well be the people who benefit.

 

[PokerGuy]

Well, someone has to pay for our massive military budget and corporate welfare. Might as well be the people who benefit.

Yeah, because the 50% of the population that pays 0% (that's zero, nothing, nada) in federal taxes each year doesn't benefit from having a military. And of course, our 14 trillion dollar debt is all from "corporate welfare", nothing to do with entitlement programs and waste amirite?

 

[SammyJr]

Yeah, because the 50% of the population that pays 0% (that's zero, nothing, nada) in federal taxes each year doesn't benefit from having a military. And of course, our 14 trillion dollar debt is all from "corporate welfare", nothing to do with entitlement programs and waste amirite?

Most of us derive little benefit from the military and see little to no benefit from the Wars and our overseas military bases. The wealthy benefit by owning the companies that supply the military as well as the resources and populations secured by our military presence.

Corporate welfare includes "free trade" and offshoring. How many American jobs has that cost us? Remember, when Americans are out of work or are working part time shit jobs, they use lots and lots of social programs. If corporations had to either hire Americans at a living wage or pay tariffs on imported goods from slave labor nations, then social programs would either be a lot smaller or paid for by the corporations that make them necessary. The wealthy entitlement class makes billions because our Government doesn't force them to pay for the benefits of access to the American market place.

 

[Anarchist420]

I think we should have a flat tax if we're to keep the individual income tax. 10% flat tax (for people who work and capital gains) would be good with the Bush deductions, plus medical and education expenses 100% tax-free and then the economy would be good again. More people would pay it if we didn't have the top marginal rate so high. Raising the top marginal rate will make it so even less people pay it.

Also, abolishing the corporate tax would be an excellent idea. You get that revenue back from the individual income tax. The corporate tax has no purpose that I can think of. It's a job-killer and destroys investment in better capital and research.

 

[Anarchist420]

Most of us derive little benefit from the military and see little to no benefit from the Wars and our overseas military bases. The wealthy benefit by owning the companies that supply the military as well as the resources and populations secured by our military presence.

Agreed.

Corporate welfare includes "free trade" and offshoring. How many American jobs has that cost us? Remember, when Americans are out of work or are working part time shit jobs, they use lots and lots of social programs. If corporations had to either hire Americans at a living wage or pay tariffs on imported goods from slave labor nations, then social programs would either be a lot smaller or paid for by the corporations that make them necessary. The wealthy entitlement class makes billions because our Government doesn't force them to pay for the benefits of access to the American market place.

I don't think that geniune free trade is corporate welfare. Managed trade is, but free trade isn't.

That said, I favor axing our managed trade agreements and replacing the income and corporate tax with a semi-protective tariff to get American jobs created.

 

[Craig234]

FYI, I think you may know I fancy myself an economic conservative. But I always try to be fair and reasonable with most things. The flat tax is simply a joke, and I can't take any politician or economist who even entertains such a theory seriously.

It's really not very complicated. Tax policy can be used quite effectively to encourage/discourage certain behaviors if also used SMARTLY. I think that is the key. Not trying to discourage business creation or punish people. Just trying to return some sense of balance to our system because it is so fvcked right now and nobody is thinking critically about what really needs to be done.

We need fewer labels - especially ones as corrupted as 'conservative' - and more rational approach to the policy (which you do here).

I watched a self-described 'liberal economist' suggest something a bit similar on reducing (or eliminating!) corporate taxes for some tradeoffs.

 

[Engineer]

I would even have a lower capital gains tax if you make less than say 100,000. There are a lot of people managing their own retirement money.

I assume you mean managing the retirement money in a non-IRA account, otherwise, IRA (and 401k) money is considered regular income for tax purposes.

I wouldn't mind lower capital gains if the it were for new investments/stock offerings but to buy an established stock (i.e. the company gets no money because you're buying the stock from someone else and not from the company), you should be taxed at regular marginal rates on any gains from it. Want a lower rate, invest in new stuff, period, otherwise, you're just trading with an individual and your income, in this case, should be treated no different than my labor earned money.

One thing I found interesting was listening to the radio a few month ago, it was stated that while the US has the highest RATE for corporate taxes in the world, it actually (after deductions) has the 2nd lowest BURDEN (i.e. effective rate) in the corporate world. Kind of surprised at that one (have not investigated to see if it is true or not but wouldn't surprise me).