If you shake out the Obama budget in terms of bold headlines, it’s really a class-warfare, tax-the-rich budget. Layer upon layer of tax hikes are piled on successful investors, small-business owners, and corporations.
The capital-gains tax goes from 15 percent to 24 percent (including Obamacare). The dividends tax goes from 15 percent to nearly 40 percent, and that’s not including the double tax on corporate profits embodied in dividends and capital gains. The Bush tax cuts for top earners are repealed. There’s the 30 percent Buffett-rule minimum tax on millionaires. The carried-interest tax for private equity, hedge funds, and other investment partnerships goes from 15 to 39.6 percent. The estate tax jumps to 45 percent. State and local bond interest deductions are severely limited. Oil and gas companies get hit. So do banks. And there’s probably more stuff in there I haven’t read yet. (Jimmy P. lays it out nicely.) Paul Ryan’s press release calls it a $1.9 trillion tax hike, with $47 trillion in government spending over the next decade and the fourth straight year of trillion-dollar deficits.
Some kind of corporate tax reform may be released in a few weeks. But we don’t know much about it. And while it may lower the top rate, it’s going to penalize U.S. firms operating abroad by roughly $150 billion in tax hikes. All in, the Obama budget raises corporate taxes by $350 billion. Just what business does not want or need.
Former Bush economist Keith Hennessey estimates that new proposals would create a ratio of at least 1.2 dollars of tax increases for every dollar cut in spending. Most of the spending cuts would slam Medicare doctors and other health providers. Unlikely to happen. And there is no overall entitlement reform. Somehow the Obama budget is being offered as a substitute for the $1.2 trillion in spending cuts from the supercommittee. But the slam down in defense remains a huge problem.
There is no $4 trillion in new deficit savings, because $1.2 trillion was already scored by the supercommittee. Plus, another $1 trillion was already counted as savings from the wind-downs in Afghanistan and Iraq. And $800 billion comes from interest savings, not program cuts.
So maybe there’s $1 trillion in spending reduction over ten years. But as the details trickle out, that’s a big maybe. Compare that to $47 trillion of total spending increases and at least $1.5 trillion of tax hikes.
The deficit for the coming year, which is $1.3 trillion, would be 8.5 percent of GDP. More important, budget spending remains at over 24 percent of GDP. Debt held by the public for 2013 would be $12.7 trillion, or 77.4 percent of GDP. In terms of ten-year totals, spending would rise by $47 trillion and deficits by $6.7 trillion.
Really, this is a budget that says we must raise taxes in order to raise spending. It’s a 1 percent vs. 99 percent budget. But if these tax hikes ever went through it would be a 100 percent whack at future economic growth.
Obama chief of staff Jack Lew was wrong yesterday to suggest that a budget passed in the Senate requires 60 votes. By law, budget reconciliation requires only 51 votes. But this budget is dead on arrival. All the Republicans and many of the Democrats are not going to vote for across-the-board tax hikes. That’s a good thing.
But the question now is: What happens next? The U.S. is in a heap of fiscal trouble — on the verge of bankruptcy. What are we going to do about it?
In what way are these "across-the-board tax hikes"? You go into quite a bit of detail about how the hikes focus on investors, millionaires, corporations, etc. You could argue - and I anticipate the GOP will - that such a budget will hurt everyone in a variety of ways, but the tax hikes themselves are very much focused on the wealthy and business. How is that "across the board"?
Reply to this commentLinkReport Abusebusiness dont pay taxes you liberal idiot, thats how its an increase across the board.
Reply to this commentLinkReport AbuseI'm almost 105% positive that businesses do in fact pay taxes.
Reply to this commentLinkReport AbuseWhich are then reflected in increased prices to the consumer; hence, they don't pay taxes.
Reply to this commentLinkReport AbuseNo.
From now on, I'm just going to refer everyone to this page on corporate taxation from The Library of Economics and Liberty, originally posted by @OBQuiet:
External Link
It says, "The tax is popular with the person in the street, who believes, incorrectly, that it is paid by corporations. Owners and managers of corporations often assume, just as incorrectly, that the tax is simply passed along to consumers."
The bottom line, as I said, is that it's complicated, not paid entirely by the corporations themselves or by consumers.
Captcha: Ball of Confusion
Reply to this commentLinkReport AbuseThe bottom line is that the businesses are a convenient abstraction for the pooling of demand, capital and labor. Any tax they pay has its burden carried by some member(s) of this pool. The business is really nothing more than people cooperating to fill a need. Taxing it is really just taxing these members.
So where the tax DOES fall on the owners, they are taxed both for the production and the distribution of earnings. And this happens only with Corporation, Not partnerships or most other other business structure.
I found the points that article made about the discriminatory effect it has on funding one of the most interesting points. By treating one form of financing (Borrowing) differently from another(Equity), you move companies toward borrowing money rather than spreading ownership.
Reply to this commentLinkReport AbuseI'm 110% positive that you are wrong.
Reply to this commentLinkReport AbuseExternal Link
Reply to this commentLinkReport AbuseHe posts a link from the IRS website that he thinks supports his point. I like this from the IRS website:
"Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits."
Hmm, I wonder what kind of business pays a self-employment tax?
Oh, and last I checked on my electric bill, I paid all of APS' excise taxes.
Reply to this commentLinkReport AbuseReally? You're going to pick out the one point of the page that applies to self-emplyment and claim that it negates the 99% of what's on that page? Really??
How about quoting from the very top:
"Business Taxes
The form of business you operate determines what taxes you must pay and how you pay them. The following are the four general types of business taxes.
Income Tax
Self-Employment Tax
Employment Taxes
Excise Tax
Income Tax
All businesses except partnerships must file an annual income tax return. Partnerships file an information return. The form you use depends on how your business is organized. Refer to Business Structures to find out which returns you must file based on the business entity established.
The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. An employee usually has income tax withheld from his or her pay. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. If you are not required to make estimated tax payments, you may pay any tax due when you file your return. For additional information refer to Publication 583, Starting a Business and Keeping Records."
Reply to this commentLinkReport AbuseYes, that is what is being picked because it proves the entire point. You guys think that tax incidence ends at the business, but no business pays the tax. In effect, the business is acting as the tax conduit for taxing individuals at a higher rate. If you took any economics course you would learn this. I didn't need to quote from the very top because the very top was a primer for everything else below it. My original question stands: What business pays a self-employment tax?
Here is another point that will drive you Lefties nuts: For the purposes of taxation, the business is treated as "person". Of course, you will probably agree with this assertion, but not with the one that Mitt Romney put out months ago when he defended corporations as "people".
Reply to this commentLinkReport Abuse" For the purposes of taxation, the business is treated as "person". "
But businesses don't pay taxes.
Check please!
Reply to this commentLinkReport AbuseOh, you got me! Not even. :P
But, if business is not treated as a "person" for purposes of taxation, how would a business pay taxes? Inquiring minds would like to know.
Reply to this commentLinkReport AbuseA business IS treated like a person for the purposes of taxation. Did I say otherwise?
THAT'S HOW I KNOW THEY PAY TAXES!
Can we stop? This whole thing was resolved rather nicely above with @OBQuiet and another poster, who explained the term incidence, which is about the degree to which businesses are impacted by the taxes they pay, and is up for debate. The fact that they DO, in fact, pay taxes is not. And that was really my only point.
Reply to this commentLinkReport AbuseThe problem is that who PAYS in largely irrelevant. It is who funds it that is important.
Example: A company decided that it will give its employees a 10% bonus. Before it executes this, the Government institutes a 1% tax on business wages. So the company drops the bonus to 9%( in effect deducting it from the employees pay) and uses the funds to pay the head tax.
Sure the company is paying the tax. But it is the employees that suffer.
Same with SS taxes. The Company remits its 'share' but it could just was well pay the employee more and let them pay the whole thing. Makes real difference to them. The same applies to pretty much all taxes charged to a business.
Reply to this commentLinkReport AbuseThat's one example. Another is that an oil company earns $500 billion in net profits. Before it distributes the profits to shareholders, etc., the government institutes a 10% tax on net profits. Instead of endangering its very successful business by raising prices, firing employees or closing facilities, it eats the cost of the tax and earns a $400 billion net profit.
I admit the way I talk about economics is not academic/jargony and more intuitive, but I know from the article that you linked to (which was very informative - thank you), that the situation is not as simple as "consumers pay business taxes" OR "corporations pay business taxes, but some combination of both that is far more complicated that either or our examples. I wish people here would TRUST me, that I get the idea of businesses passing along the cost of taxes payments to consumers. If one person repeats that in some new way, I'll go nuts. The point, my point all along, is, 1. Businesses pay taxes. 2. Who actually incurs the cost of those taxes is complicated and includes consumers, but also shareholders/profits, and other actors.
Reply to this commentLinkReport AbuseYou don't get it because if you did, you would stop with the foolishness that businesses pay taxes. Businesses is simply the conduit through which individuals are taxed. As someone else put it succinctly, businesses act as tax collectors for the welfare state. If politicians were honest with their intent, they would simply tax all individuals directly and the taxes on businesses would be zero, seeing as how it is impossible for businesses to pay taxes (and again, notice how you are so forceful with stating that businesses pay taxes, but that if someone suggests that we should keep taxes low so that businesses can create jobs, you will argue the exact opposite and say that businesses should pay more in taxes).
Reply to this commentLinkReport Abuse*smacks head against wall*
This is the result of today's education.
Reply to this commentLinkReport AbuseI think it is a generally accepted principle in economics that the actual costs of corporate income taxes are transferred to other actors. Though they do disagree with who bears the actual costs.
External Link
Its not as directly deceptive as the employers 'share' of Social security payments but it does make understanding who actually foots the bill for taxes harder to achieve. And Governments LIKE having people ignorant on this issue.
Reply to this commentLinkReport Abuse"Businesses pass the expense of taxes to their customers in the form of higher prices," she wearily explained.
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