The Republicans are always complaining that US tax rates are too high, but the facts don’t support this idea. They frequently quote the top “Marginal Tax Rates,” which is 35%. However, this tax is only paid if you make more than a certain amount, and it only applys to the last dollars made. If you actually look at the amount that people pay, the average is only 18%.
But even this doesn’t tell the whole story. Businesses have all sort of deductions and loopholes that help them bring the taxes even lower. So let’s look at some analysis. A good place to start would be comparing the precentage of GDP that is collected as taxes. The first chart shows individual tax rates:
| Overall Tax Rates a percentage of GDP | ||
| 1. Denmark – 48.9 2. Sweden – 48.2 3. Belgium – 44.4 4. France – 43.6 5. Norway – 43.4 6. Italy – 43.3 7. Finland – 43.0 8. Austria – 41.9 9, Iceland – 41.4 10. Hungary – 39.3 |
11. Netherlands – 38.0 12. Spain – 37.2 13. Luxembourg – 36.9 14. Portugal – 36.6 15. UK – 36.6 16. Czech – 36.4 17. Germany – 36.2 18. New Zealand – 36.0 19. Poland – 33.5 20. Canada – 33.3 |
21. Ireland – 32.2 22. Greece – 31.3 23. Australia – 30.6 24. Slovakia – 29.8 25. Switzerland – 29.7 26. Korea – 28.7 27. US – 28.3 28. Japan – 27.9 29. Turkey – 23.7 30. Mexico – 20.5 |
| OECD | ||
This chart shows comporate taxes rates:
| Corporate Taxes paid as Percentage of GDP | ||
| 1. Norway – 12.9 2. Australia – 6.6 3. New Zealand – 5.8 4. Luxembourg – 5.0 5. Czech – 4.8 6. Japan – 4.7 7. Denmark – 4.3 |
8. Spain – 4.2 9. UK – 4.0 10. Korea – 3.8 11. Ireland – 3.8 12. Belgium – 3.7 13. Canada – 3.7 14. Sweden – 3.7 |
15. Finland – 3.4 16. Italy – 3.4 17. Netherlands – 3.4 18. US – 3.3 19. France – 3.0 20. Portugal – 3.0 21. Switzerland – 3.0 |
| 1. OECD 2. Tax Policy Center | ||
As you can see, the US 27th in individual taxes and 18th in corporate taxes; not very high at all.
But this only looks at one aspect of taxes. If you look at some of the details it more interesting:
Corporate Taxes Are Regressive. This means that big business pays less in taxes than small business. Looking at the tax rates for different business incomes:
$20,000 in income = 35% Tax Rate.
$100,000 in income = 39% Tax Rate.
$9-million in income = 34% Tax Rate.
In other words, a big business making $9-million pays less tax than a business making $20,000
Big Business Don’t Pay The Top Rate. Even if a corporation has a top rate of 34%, they rarely actually pay that rate because of loopholes, credits and deductions. In fact some corporations pay a negative rate.
For example, during 2005 1.3 million U.S companies and 39,000 foreign companies paid no income taxes inspite of having $2.5 trillion in revenue. This breaks down to 60% of all US Controlled Corporations 60% of all Foreign Controlled Corporations pay no taxes.
If you focus on large corporations, the number is a little lower; 54.9% of Large US Corporations paid no taxes for at least one year and 44.% paid no taxes for at least three or more years. These are corporations that have average gross recipts of $663-billion each.
Foreign Controlled corporations do even better with 71.7% of them paying no taxes for at least one year. Part of the reason is that Foreign Corporations can hide their profits overseas. For example, the parent can company sell the product to its US subsidary at an inflated price. That allows the US company to makes very little money, while the Foreign makes all the profit.
Real World Examples. To make it more real, let’s look at some real corporations and high rollers who paid little or no taxes:
1. Warren Buffet says he pays lower taxes than his secretary:
“Mr Buffett said that he was taxed at 17.7 per cent on the
$46 million he made last year, without trying to avoid
paying higher taxes, while his secretary, who earned
$60,000, was taxed at 30 per cent.”
That’s without using any tax avoidance techniques. If you use tax avoidance techniques, you can do much better.
2. In 2009 General Electic made $10.3 billion and paid zero taxes and got a $1.1-billion refund. Their 2008 tax effective rate: 5.3%.
3. In 2009, Exxon Mobile US = $0. Although they claim to pay US taxes, Forbes points out that their “financial statement’s don’t show any net income tax liability owed to Uncle Sam,”
In fact, most of their income was moved to “tax-Shelter” countries.
4. In 2008, Goldman Sachs had $2.3 billion profit. EffectiveTax rate = 1%.
5. In 2009 Wells Fargo made $8 billion, Taxes = $0.
6. The Dodgers Owners made $108 million between 2004 and 2008. Federal and State Taxes = $0.
7. Coor/Molson Brewing had a tax rate of -2%.
8. Liberty Media had a tax rate of -2.6%
How Did This Happen? Over the past 50 years, rich corporations have learned all the trick of buying influence and favors from the political system. If you compare tax rates of corporations, rich individuals and the middle class, more and more of the burden of supporting the countyr falls on the middle class:
Personal Income Tax as Percent of Income.
1945 – 11% 1950 – 8% 1955 – 10% 1960 – 10% 1965 – 10%
1970 – 11% 1975 – 9% 1980 – 10% 1985 – 9% 1990 – 9%
1995 – 9% 2000 – 10% 2005 – 8% 2009 – 9%
Percent Income taxes paid by corporations
1945 – 45% 1950 – 38% 1955 – 41% 1960 – 35% 1965 – 34%
1970 – 25% 1975 – 25% 1980 – 20% 1985 – 10% 1990 – 18%
1995 – 19% 2000 – 18% 2005 – 15% 2009 – 18%
As you can see, personal tax rates haven’t changed more than 2% over the last 65 years, but corporate taxes fallen from 45% to 18% so they pay less than half what they used to. That means that more and more of the burden of supporting country falls to the middle class.
As Warren Buffet said:
“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
http://www.gao.gov/new.items/d08957.pdf
http://www.worldwide-tax.com/us/us_taxes.asp
http://www.cbo.gov/ftpdocs/69xx/doc6902/11-28-CorporateTax.pdf
http://www.taxhistory.org/www/features.nsf/Articles/FE9DCA58402875D7852573680064DA50?OpenDocument
http://money.cnn.com/2008/08/12/news/economy/corporate_taxes/
http://www.timesonline.co.uk/tol/money/tax/article1996735.ece
http://www.bloomberg.com/apps/news?pid=20601110&sid=a6bQVsZS2_18
http://www.forbes.com/2010/04/01/ge-exxon-walmart-business-washington-corporate-taxes.html
http://www.charlotteobserver.com/2010/03/26/1337021/billions-in-tax-benefits-for-banks.html#ixzz0jVmRHw1e
http://www.latimes.com/business/la-fi-hiltzik24-2010feb24,0,5865964.column
http://www.denverpost.com/ci_14870850
http://www.opednews.com/articles/Who-Pays-Taxes-by-PrMaine-081210-57.html
Authors bio is coming up shortly.