Taxing the Wealthy: The Old Pea and Thimble Trick

[denem]

The left spend a a lot of time debating the appropriate marginal tax rates for high income earners. It's a legitimate debate. Here's some figures:

Federal Personal Income Tax Receipts 1945 -2009
as a Percentage of GDP



You will notice the rate is about 9%, far less than the income scales would suggest. There's a reason of that. Income tax is paid from net income. The wealthier you are, the more deductions and diversions you can engineer. Tax avoidance schemes are more than a growth industry. As Warren Buffet notes, he pays a lower percentage of tax than this secretary.

But that's only half the story. Like the shell games of old, while the crowd is intently focussed on marginal rates. the lurking thieves have their hands in your back pockets. Here's the real story:

Federal Corporate Income Tax Receipts 1945 -2009
as a Percentage of GDP



I don't pretent to be an expert on the mechanics of moving corporate profits between accounting years, offsets, write downs. Corporate revenue is much more volatile and dependent on the state of the economy that personal income. What I can say is this:-

The most effective way to reduce your taxable personal income is to corporatize it, if possible.
Corporatizing income is relatively easy for the wealthy and virtually impossible for wage earners
We hear a lot about 'tax breaks' and loop holes - You don't have to wonder, look at the numbers
The Clinton years collected very little extra corporate taxation, give the state of the economy
Obama's 'simplification' of the tax system could yield some very interesting results
I'd be very interested to know how corporate tax receipts were restored to 1970's levels after
the Democratic Congress was elected in 2006.

WHATEVER
CORPORATE TAXES ARE 1% OF GDP AND SHOULD BE 2 OR 3 TIMES HIGHER

Graphs in this OP:
http://www.freeby50.com/2010/07/history-of-federal-tax-receipts-as-of.html

[denem]

1. ......

[denem]

2. Kicks are welcome (obviously) If i've missed something

obvious, by all means comment. I was stunned by the corporate tax numbers.

[damntexdem]

3. I'd rather see them playing the deductions game on a 91% tax rate.

And they obviously relish the Bushista reductions, including the recent two-year extension.

[denem]

4. If they can move their income into a corporation, that 91%

is an illusion. Corporations don't pay much tax.

[denem]

5. ...

[denem]

6. Unrec Squawk . 3 unrecs since I bumped this back.

(Yes which deserves another unrec)

I bumped it to illustrate that Corporations are not paying anything like their fair share of tax, and should receive attention and criticism. Doubling or tripling that contribution back to 1980 levels would go a long way to securing the tax base.