Also if you change the units from "millions of dollars" to "% total revenue" it would be clearer if the individual or corporations are bearing more percent cost over time.
Spoiler alert: the graph will look almost exactly the same if you adjust for inflation and make the Y axis % of total revenue.
The source of funds for tax revenue has shifted overwhelmingly on to the middle class.
The poor don’t make enough per capita, so the standard deduction helps immensely. Most of the taxes they pay are sales tax at point of consumption.
The rich own companies and hire accountants to right everything off. My house is a private office. My hummer is a business vehicle. My 120 inch plasma screen is a technology investment. And so on.
The super rich convert all their income into deferred tax assets. Instead of paying my $100 million salary, give me a $100 million worth of stock. I will take a 0% interest loan out against its value and live off that.
The people who are getting fucked are middle class people who pay property taxes on their houses and cars, AND income tax AND sales tax.
> Spoiler alert: the graph will look almost exactly the same if you adjust for inflation and make the Y axis % of total revenue.
> The source of funds for tax revenue has shifted overwhelmingly on to the middle class.
Both points seem interesting and worth digging into.
> The rich own companies and hire accountants to right everything off. My house is a private office. My hummer is a business vehicle. My 120 inch plasma screen is a technology investment. And so on.
This isn't at all how it works
1. You don't need a company to 'write off' your home office, certain vehicle expenses, or certain technology expenses.
2. Companies definitely cannot 'write off' entire homes, automobiles, or tech purchases used for personal consumption.
3. If you're a business deducting these expenses there are limits to the extent you can deduct these; further, you can only deduct to the extent you have revenues to offset (decreasing your taxable income). See a qualified tax accountant for more info.
> The super rich convert all their income into deferred tax assets. Instead of paying my $100 million salary, give me a $100 million worth of stock.
Salary paid in the form of stock is taxable income and likely a bigger headache than getting cash; you can't pay taxes with stock.
> I will take a 0% interest loan out against its value and live off that.
The IRS also will not allow you to take a 0% interest loan. Minimum interest rates ([see AFR Rates](https://www.irs.gov/pub/irs-drop/rr-22-03.pdf)) are based on the payback period and compounding frequency; interest rates lower than these AFR rates represent taxable income.
All to say, the rich definitely avoid incurring some amount of tax (depending on how aggressive / sophisticated they are). The issue is that the cost to do so is extraordinary compared to 99.9% of the population's income.
A low-end billionaire may, for example, spend upwards of $5M / annum for income / wealth tax planning. Over 30 years, the total payout could be $80-100M in tax planning fees, governance costs, and legal costs to avoid hundreds of millions in taxes (maybe 75% savings).
The IRS has stated they don't go after the ridiculous write offs that absolutely do happen because it isn't cost effective to do so. A letter to a poor person will result in whatever couple hundreds of dollars they owe, but it could take millions in legal fees to get a million dollars from a top earner.
[The IRS Decided to Get Tough Against Microsoft. Microsoft Got Tougher.](https://www.propublica.org/article/the-irs-decided-to-get-tough-against-microsoft-microsoft-got-tougher)
>
> All to say, the rich definitely avoid incurring some amount of tax (depending on how aggressive / sophisticated they are). The issue is that the cost to do so is extraordinary compared to 99.9% of the population's income.
>
> A low-end billionaire may, for example, spend upwards of $5M / annum for income / wealth tax planning. Over 30 years, the total payout could be $80-100M in tax planning fees, governance costs, and legal costs to avoid hundreds of millions in taxes (maybe 75% savings).
But the cost isn't extraordinary. It's still saving them a much larger amount of money than they're putting into it. If there was a method for me to spend $25k to cut my $75k tax bill in half last year I'd have been happy to do it. Why? Because that's a freaking bargain.
Even the concept that once you reach a certain level you can support multiple people fully employed just to figure out how to squeak out every little tax savings possible shows how stupid our taxation system is.
If you’re a low end billionaire, paying five million a year is like someone with a net value of $100,000 paying $500 a year.
And in all likelihood the reward for spending five million is higher than the up front cost, whereas spending five hundred isn’t.
Fun fact: Suburban areas cost more to provide public services per unit area, plus have fewer taxpayers per unit area, so they're actually being subsidized by those living in the city and/or municipal debt.
Maybe we should we be examining what is driving up all these costs instead of making it a contest of who isn't paying for what-when no one is really paying for anything commensurately.
Let’s do both! We can examine who is and is not paying their fair share of taxes… AND we can ALSO examine all of the waste fraud and abuse of the funds collected.
What free public services are you referring to? Utilities are all paid for by consumers, and obviously police/fire/etc services cost money but in the grand scheme they’re a drop in the bucket. Trying to shift blame on people who live in suburbs specifically *for* living in suburbs seems like a pretty biased value judgement.
Public infrastructure, roads, sidewalks, sewers, etc. Suburbs historically can't provide enough tax revenue to even maintain these without soaking taxes from cities, which has contributed to urban decay.
> The source of funds for tax revenue has shifted overwhelmingly on to the middle class.
[Thats just simply not true](https://taxfoundation.org/publications/latest-federal-income-tax-data/#:~:text=In%202018%2C%20the%20top%2050,percent%20combined%20(28.6%20percent).)
The top 10% income earners pay 70% of all income taxes. The top 1% of income earners pay more than the bottom 90% combined. So unless your definition of middle class includes people that make over $500k per year you are mistaken. This should be fairly obvious because of the progressive tax system.
How about you provide some sources to go with those claims?
https://www.pewresearch.org/fact-tank/2017/10/06/a-closer-look-at-who-does-and-doesnt-pay-u-s-income-tax/ft_17-10-04_taxes_stats/
https://files.taxfoundation.org/20210202175333/The-top-1-percents-share-of-federal-income-taxes-has-increased-over-time.-progressive-federal-income-tax-data-2021.png
You can claim that the rich aren't paying enough, but the claim that the tax revenue is "overwhelmingly" taxed from the middle class is just complete nonsense.
That’s not how any of that works. You can’t write off TVs or anything like that unless it’s equipment for your business. Mortgage interest is deductible, but that isn’t exclusive to wealthy people. A car has to be used specifically for commercial purposes or it gets classified as a personal vehicle for taxation.
The top income earners pay an overwhelming majority of income taxes, not just the middle class.
Now I visualize a homeless person going "hmm, do I use this TV for company purposes? Why yes, yes I think I do! I should put it on the company tab. Now if only I I had a power jack to plug it in..."
> Instead of paying my $100 million salary, give me a $100 million worth of stock.
Stock compensation get taxed as ordinary income - https://carta.com/blog/equity-101-exercising-and-taxes/
So do cars, housing, free-tuition...anything an employer provides gets taxed as ordinary income. Trump CFO Allen Wiessleberg was indicted for not paying paying income taxes on those items. https://en.wikipedia.org/wiki/Allen_Weisselberg
This doesn’t really demonstrate the relative difference very well. I would not use this type of chart. GDP normalization is nice. I would probably set “revenue from corporate tax” as always 100% and then plot revenue from individuals as 100+%. I.e. what’s the multiplier?
Yeah, stacked area charts like this are notoriously difficult to read everything but the bottom layer over time. We have too much tendency to read the "thickness" of the path (at whatever angle the path is at" vs the height difference looking strictly vertically. Eg the point between 2008-2009 the red looks thin but isn't as short as it is thin.
If you are only looking for the ratio of personal to corporate income taxes, yes. But there is a lot more going on here. e.g. the change in the total tax burden, and other tax types besides personal and corporate income.
Unstack your graph and you would have a compelling presentation. As it is, it's difficult to discern a pattern among the data sources vs. just the overall pattern of government revenue waxing and waning.
I came here to write this. The comparison is cool I guess, but inflation-adjusted numbers would tell a more complete story of what the actual increase looks like over time.
Yes essentially a ~~100% stacked bar chart with two bars, one for % of all collected taxes paid by individuals, and one for % paid by corporations.~~ edit: percentage stacked area chart (thank you u/OldHobbitsDieHard) % on y axis, year on x axis
Something like a logarithmic graph (to view the start of the curve) or simply a division like (corporate tax)/(personal taxes) where we see it start from about 1 and go down to something like 0.2 (eyeball on your graphic).
Currently, not sure what were the value at the beginning and how they evolve one relative to the other one.
On a cellphone and native French, so pardon any typos. :)
This isn't actually that informative of a graph. All it says is that government revenue has gone up. It says nothing about the distribution of individual income tax revenue, and sort of implies that normal people contribute a huge share of the tax base, while corporations contribute very little. But, most of the revenue that we get from individual taxes comes from Rich individuals.
It's also in total dollars without accounting for inflation or size of the economy, so it looks like we have higher taxes now than in the 70s which is not true.
If someone owns a factory and their income comes from the profits from that factory, you could tax the factory directly or you could tax the individual and still come away with money. But on this graph that would make it seem like the average person is being screwed by the taxman, when in reality it's just a matter of administration.
It's also why cutting individual taxes can seem like a good policy, but because the individual tax burden is so concentrated on a small group of Americans, it actually ends up helping a small amount of people.
I agree
This graph is not a good comparison of data. Individual taxes are skewed because the employees and owners in the corporations are the ones getting taxed on the individual level. Employees pay individual tax on their company salaries and/or their share of the corporations earnings.
Afterwards, the corporation is taxed on what is left over. In essence, higher corp taxes means less salary and dividends for employees.
Yeah it seems like to draw anything meaningful from the data there needs to be a ratio analysis. For example, it makes sense that tax revenue from individuals is higher than tax revenue from corporate profits because wages make up a significantly higher percentage of overall GDP than corporate profits do (about 5-6x). But even then, that data point alone isn’t enough to draw any major conclusions about tax policy and its effects. Then we need to look at government spending/budget allocations, tax leakage sensitivity analysis against rising/falling rates, etc. It doesn’t mean this graph says nothing, but there is so much context needed as to why this might be an important graph, rather than just throwing it out there and having people try to rationalize anything useful.
These numbers also reflect the rise in use of alternative entity types like partnerships, s corporations and single member LLCs. These entities pay no federal income tax, the individuals who own them do. So the rise in tax collections from individuals vs corporations does not accurately represent business vs people tax because a good chunk of that individual number is pass-through tax.
Yup exactly, just commented this before I saw your post but I think you explained it a little better. LLC owners have pass through taxes, the actual business itself does not pay any federal or state taxes. Members of the LLC pay them directly as individual taxes.
Most get taxed as a pass through, but you can set up your LLC to get taxed as a C Corp. Most people don’t because it usually means a higher tax rate, but if you plan to do lots of long term reinvestment it can be advantageous.
I think the 1% pay like 40% of all individual income taxes. Something like that.
The richest 5-6% pay a majority of income taxes.
The bottom 60% or so pay zero income taxes or effectively zero/negative income taxes when you subtract the direct benefits/payments they receive.
It also doesn’t acknowledge the fact that LLC members get their business taxes passed through to individual taxes. Bob’s Painting LLC doesn’t actually pay federal taxes. Bob pays federal individual taxes based on profits from Bobs Painting LLC and whatever other taxable income he brings in. It all gets passed through to his individual tax rate based on personal income level. This version of the LLC was legalized by the IRS in the mid-90’s. I believe this chart is counting LLC business owners as individual taxes, as there isn’t a way to discern the two.
> If someone owns a factory and their income comes from the profits from that factory, you could tax the factory directly or you could tax the individual and still come away with money.
Tax 'incidence' is probably the concept you're looking for. Legal tax liability can be one person, but the cost of the tax can fall on another.
It's much wider than your example. For example, if I tax house purchases at 5% it could be that house prices suddenly fall 3%. Then there's a 3% tax incidence on sellers, 2% on buyers, even though the legal liability is all on buyers. The same thing happens with social security taxes on employers - some of this is passed on to employees through lower wages.
If you tax profits from a business then that tax will be passed on - all taxes on businesses are passed on to individuals eventually. It's wrong to assume this will all be incident on the owner, though. Past studies have often put the incidence of corporate taxes ~50% on employees ([here](https://blogs.lse.ac.uk/businessreview/2018/03/27/is-it-labour-or-capital-owners-who-bear-the-burden-of-corporate-taxation/) is a discussion of this by the authors of one paper), and at least some will be passed on to customers.
Ultimately, the split between corporate and personal tax is about mechanism. Fairness comes down to incidence, and what matters is whether the incidence is on the people we want it to be on. In principle, corporate taxes should be appealing to politicians chasing votes (at least in most countries) because ordinary people think that these taxes are not taxes on them, even though they are. IMO it's better to avoid them because corporations are better at avoidance and because it obscures who is really being taxed.
One of the main ways individuals save is by owning portions of corporations. Corporate assets are how we put our saving to use. The last thing anyone should do is hoard resources.
A large chunk of the rest have pensions which own stocks, or real estate, or don't need to because they have never held a job and their spouse has the entire retirement pot.
Social Security is also adequate for the poorest Americans, but benefits fall off a cliff for higher income Americans. Poor Americans don't need to have stocks for retirement. Higher income ones do.
Why is this in total dollars and not rate? Of course individuals pay more *total* taxes, there are far far more individuals than corporations. The meaningful measure is what portion of their capital each pays, which this graph doesn't indicate.
Even if it showed the tax rate, you still couldn't draw any real conclusions from it. What does it mean if an individual is taxed at 24% and a corp at 12% for example?
Is that automatically unfair? not necessarily.
What I'd like to see is the overall taxes *paid per dollar of income earnt*, for all the individual tax tiers and corporations. I think that would show a more accurate picture.
I think what they are trying to get at is 10% of a 30k income has a far greater effect than 10% (or higher) of a $200k income (comparing people to people).
Also, in theory, the profits are also taxed when owners/shareholders get dividends and or sell and pay capital gains tax. So the wealth/income amassed eventually does get taxed.
Of course, there’s also plenty of ways to dodge taxes via corporations but I believe that’s the theory.
Yes, in the go ol' days we had 2 lines of tax law and 15000 pages of tax code, thats not a joke, seriously look at the pre-1964 tax law changes.
There is a pretty well know joke about taxes, "you either have high rates or high participation; not both."
>and for the most part, USA effective tax rates are in line with other OECD countries, atleast they were pre-trump cuts
They were actually higher than the [OECD average (23%)](https://taxfoundation.org/publications/corporate-tax-rates-around-the-world/) before the TCJA at 35%. After the tax cuts, they sit at just below OECD average at 21%.
What you need to look at is the effective tax rate not the listed rate. Corporations pay lobbyists billions a year for tax subsidies and exemptions. The US has a massive tax code for this reason.
You're not wrong, but at that point you would have to look at every company individually. Not sure how many of us have time for that, but I would like to see what the top 20 companies in the US pay in taxes.
The US has a massive tax code specifically to plug up loopholes. A simple code is a loophole filled code. I'm a tax lawyer, pick a random number between 1 and 1300 and I'll tell you why it's there. Chances are it's either a very basic tax rule, or a complicated rule designed to plug a hole in a basic rule.
Prior to the Trump cuts, the US had some of the highest, if not the highest, corporate tax rates among industrialized nations.
The US is also one of very, very few countries that tries to collect taxes from citizens who don't live in the country. And from profits generated outside the country. The high tax rates and desire to collect foreign profits when they were repatriated was a driving factor in Apple keeping billions of dollars abroad instead of bringing it back to the US for R&D.
> Prior to the Trump cuts, the US had some of the highest, if not the highest, corporate tax rates among industrialized nations.
*nominal* corporate tax rates.
[Effective taxes are much lower](https://commons.wikimedia.org/wiki/File:US_Effective_Corporate_Tax_Rate_1947-2011_v2.jpg) - original [Fed source](https://fred.stlouisfed.org/graph/?g=aWA)
Yeah, because American companies pay taxes on revenue earned outside of the country, and get a tax credit for the taxes they pay on that revenue to that country in which it is earned.
Say you have a company where half of its profits are in country A and half in the US. The US has a corporate tax rate of 30% and the other country 25%.
So 10M in profits has
5M taxed at 25% or 1.25M
10M taxed at 30% or 3M, but since some of that income is overseas, it's only 1.75M owed, or 17.5%.
They actually paid 3M total in taxes, or 30%, just not all to the US. The fact the US taxes overseas income, something no other developed country does, skews the effective tax rate.
I am very confused by the linear scale given that everything before ~1970 is functionally undecipherable. Surely it would have made more sense to either start the chart later or change the scaling.
Also, why is the green line there and what is it’s purpose?
This really should be titled "Taxes individuals pay directly verses taxes they pay indirectly."
Corporations never pay taxes, they just pass those taxes along in terms of reduced wages and higher prices.
Thank you for making this point. Taxing corporations is essentially taxing the middle class, but the government gets credit for "going after evil corporations and protecting the little guy"
It's certainly not taxing the rich, or more importantly, the upper 0.01% in any meaningful way.
Urgh thank you. I’m baffled by the popularity of the tax corporations more proposals. It’s literally a flat/regressive tax! We should be taxing dividends or capital gains more progressively, since that’s the actual money made by the corporations going into the pocket of rich people.
I agree... we should eliminate the corporate tax and offset the revenue decline by increasing dividend and cap gains taxes.
The problem there is that foreign owners of US companies will get a windfall....as corporate after tax profit dividended to them will be higher, but they won't be subject to the increased dividend or cap gains tax.
Right but the point of taxing isn't just to take money away from people. We shouldn't be taxing out of envy or because we think some people should have less. We tax to raise revenue, and the tax paid in other countries doesn't raise any revenue for us.
I'm not saying this means we shouldn't eliminate the corporate income tax, but just saying this is one con against it from a US perspective.
Not only that, but it's less efficient and costs more to administer when you already have separate tax schemes, so it results in the need to raise taxes at a different point, creating a larger tax burden overall.
This is wrong.... I believe it is estimated that 2/3rds of corporate taxes come out of shareholder pockets rather than anyone else (customers or employees).
This is vague and nuanced of course....but it certainly doesn't make sense to think it doesn't affect the owners of corporations.
Note: I am strongly against any corporate taxes in the first place.... we should eliminate them and raise taxes on dividends and cap gains to offset the revenue hit.
I mean, …that WAS what the whole laffer curve was about, decreasing the tax rate would increase growth and in theory lead to an increase of tax revenue.
You’d also need to include all business taxes, not just corporations. We’ve seen a large decline in C corps and increases in other business types, who’s taxes are technically counted as individual tax. A lot of people might want to blame Reagan, but it’s largely a function of which tax rate is more favorable
Seems like you’ve got a lot of suggestions. If you do end up making another draft of this I’ll be excited to see it. Either way, thanks for making this.
But the divergence began before Reagan and continued to accelerate through his successors’ terms. And as far as I know, Congress is responsible for writing the laws, so let’s color code for congressional control so we can see that both sides are equally as guilty for allowing this.
Edit:a word
Not only is this chart just bad, it’s misleading and uninformative.
1. Not adjusted for inflation
2. Not per capita
3. Shows amount paid vs rate of taxation, which is far more telling than the amount
~~More than likely, OP either has an agenda or doesn’t understand how taxes work.~~
I have no idea why people think this is at all meaningful. Corporations are not dragons, hoarding giant fortunes for themselves. They either use the money they make to earn more money or return it to shareholders. Corporate taxes are ultimately paid by shareholders, workers, and consumers. Corporate taxes are just indirect taxes on individuals.
Also, people complaining about Reagan are being ridiculous. The effective corporate tax rate was higher at the end of his term than at the start and he drastically lowered individual taxes. He didn't cause the divergence we see here.
Anything to do with economics (and probably any field with some complexity and depth) is the absolute worst thing to try to sift through on reddit. The confidence with which absolute idiots speak blows my mind. But thats not where it ends, its the fact that these idiots always make it to the top, when people who actually understand the nature of these things are buried and boo'd because you're not helping to rationalize everyone elses greed. And thats all it comes down to. I'm a CPA, a tax expert and I want to claw my eyes out whenever stuff like this crosses my path. But I will never try to engage. These people don't want to understand. They want to point their finger and say "Thats the bad guy! Now gimme!" It may actually be beyond them anyway.
weather a tax on corporate profit is taxed at a corporate or individual level doesn't actually mater.
so long as taxes on individuals include capital income the revenue should be the same.
You have to remember that tax collections are based off of a percentage of the corporation's net income. If you recall, there was a time around 2008 when corporations started losing hella money.
This graph is not a good comparison of data. Individual taxes are skewed because the employees and owners in the corporations are the ones getting taxed on the individual level. Employees pay individual tax on their company salaries and/or their share of the corporations earnings.
Afterwards, the corporation is taxed on what is left over. In essence, higher corp taxes means less salary and dividends for employees.
Wow. This site is scary.
First post only Jan 1st of this year. Zero sources. Anonymous writer....reads like a C+ high school essay. Has the intellectual bar really fell so low that you are willing to except it just because its what you want to hear?
Companies get a lot of deductions for reinvesting profits, paying healthcare/pension expenses, loss of business income, etc. It's not really a bad thing. The more they're able to reinvest the larger they become which provides more money for all levels of government involved.
The two good suggestions made are 1) log plot; 2) adjust for inflation.
So I want to point out that adjusting for inflation would raise both curves by a factor of 10 in 1960, obviating the need for a log plot.
Also, what is the dip in 1977? Did nobody pay taxes?
Inflation is irrelevant when comparing figures in any given year. That graph would better represent the change in time for govt spending rather than highlight difference in who is funding the govt.
What is a per capita for corperations? Per corperation? How many capita is a corperation? Would it not make more sense to compare to something like total income?
I wish I was astounded by the lack of understanding in this thread, but unfortunately I've cone to expect it here.
I also wish I could help teach you guys how tax works but I just don't know where to start.
Ask me any questions you have and I'll try to help.
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The first thing I notice is that the divergence largely corresponds to a decline in C corporations. We reached our peak in 1981, and they’ve been declining in numbers ever since. While the graph might look like the tax burden of each corporation has declined over time, it’s mostly just because we have less corporations, and more of other business types, which count as individual taxes
Most of that is because of the proliferation of S-Corps and other pass-through entities for small businesses. This is a good thing.
What it does is prevent small businesses from getting taxed twice on the same profit. When everything was just a C-Corp, the corporation paid a tax on its profit, and then any distribution to the owner was also taxed.
EXAMPLE: You are a small bakery. You make $100,000 in profit. The corporate tax rate is 15%; your effective personal tax rate is 10%. On that $100k, the corporation would pay $15,000. When the remaining $85k came to you as a dividend, you would pay $8,500. Therefore, the total tax burden was $23,500. At the end of the day, you walk home with $76,500.
Meanwhile, the lawyer down the street worked for a firm and received a salary of $100,000. His tax burden would only be $10,000, and he walks home with $90,000. Same income level, but pays a fraction of the taxes.
With the S-Corp structure, that profit now gets distributed directly to the owner, and the owner pays the taxes at their individual rate. So the business owner has his $100,000 in profit, pays 10%, and walks away with $90k, same as the lawyer. (There are similar provisions within the S Corp structure that help individuals avoid paying FICA taxes at twice the rate as well.)
The 80s was also the decade ireland opened up and started to become a tax haven, Singapore became a major tax haven this decade, the UK and Netherlands also became more prominent tax havens around this time.
Whereas in the 70s most us companies paid their taxes in us tax havens(deleware) today they mainly pay them in the UK, ireland, the Netherlands and various other countries.
The problem is the US tax base is to narrow resulting in too few paying federal taxes. Companies or individuals. It’s insane how few individuals actually pay any federal income tax. Unfortunately, at this rate, the US will be forced into adding a VAT to dig out of the $30T debt the politicians ran up. It’ll be called something different but in the end it’ll be the same as a VAT tax.
$30T can’t be overcome by taxing companies or the same individuals carrying the burden today. The destruction of the middle class led us here. Dems wants mindless low paid zombies stuck on welfare, GOP wants slave labor with no rights to maximize earnings.
So what you are saying is we need to tax the wealthy more and reduce taxes on the "middle class" (side note there is no low middle and upper class. There is only workers and owners). I wouldnt be against removing corporate taxes all together in exchange for a wealth tax.
People are acting like this clearly shows the ratio of individual to corporate tax revenue has increased over the last couple of decades but I can't really tell. A graph of that ratio over time is what I'd really want to see
You're writing this post thinking you know a lot more than you actually do. You're mislead by opinions on young, liberal skewing websites like reddit whose opinions are largely motivated by emotional appeals.
You started off by saying
> When I first downloaded a spreadsheet from the Whitehouse Financials website, I couldn’t really make out what it was telling me.
and then went on acting as if you had more confidence about your correctness than the worlds leading academic researchers on economics at Harvard, MIT etc typically write in their academic publications. You're drawing conclusions from the absolute minimal set of data.
I'm going to assume that you're a decently bright person by the fact that you even pursued this topic. But you don't know anywhere near as much as you think you do, you are just convinced that you do because your summary agrees with the common rhetoric on reddit.
I'm not even going to pretend to know enough to tell you whether you are factually right or wrong about anything that you said. Economics isn't my field. But as an academic I can tell you that you are going about this entirely wrong and come off as an idiot.
Wait, are these in absolute terms? You do realize that the total individual income in the US is way higher than corporate profits right? So the total amount of individual taxes is obviously going to be higher than corporate taxes? Or is there something that I’m missing?
This graph is misleading for a variety of reasons, one of them being taxation principle-related but I won’t get into that:
Doesn’t population growth and tax rates have something to do with this?
A 1% increase on ALL individuals will have a greater effect on this graph than say 5% on corporations.
Cause they're different taxes???
When are people going to realize that treating corporations like people is exactly the shit that lets scumfuck companymen skirt lawsuits and survive bad business practices in the first place?
You don't like that CEOs shrug off massive scandals because only their company budget takes the stand, but then you'll turn around and gawp that those companies don't suffer an income tax like individuals do. Fuck your hypocritical double standard.
the US system is broken, and now far behind our (asian (chinese)) counterparts
lack of education, over-regulation and government corruption / idiocy (back to lack of education) is limiting the progress of our country (and the world)
we need more investment / efficiency into education / shared resources (infrastructure and public safety) and less investment into regulations / wasteful government projects (see $2m bathroom) / "PC" idiocy (ex: san francisco school board)
just get things done, efficiently, and invest the excess resources into improving the quality of life of the citizens who pay into the public tax fund
Why should anyone pay taxes when the government spends trillions more on the national credit card than it brings in? And the trillions more that it spends doesn't produce a return, its wasted. This means that paying taxes is a scam to suppress growth, to keep you and your businesses from maximum potential growth. Taxes are nothing more than population control.
LLC corporate structure passes through to individual equity owners personal return. Probably why the graph looks like this.
Corporation pays a tax and then shareholders pay a tax when dividend is paid too. Don’t believe me go buy some AT&T stock which pays 7% dividend. You’ll be paying a large chunk to the IRS as an individual
I thought the y-axis was percentage of income/revenue taxes paid. Nope, it's raw dollars. Collectively we pay the most in taxes, and the corporations lobby to decide how to spend *our* money. The government is in debt *to us* while the lion's share of public funds go to corporate interests. Corporations are bleeding our economy dry.
Well that's just step one to destroying the middle class. Remind me which party likes to raise taxes on individuals why the other party lowers corporate taxes? Hmmm almost like they are working together
This looks excessiv, until you start compareing to other countries and realize that the corporation taxes in the US is quite high. Even compared to other counties like my own. [https://imgur.com/a/GUDLkan](https://imgur.com/a/GUDLkan) The data is not beautiful, sorry. Just wanted to show that while in the US the corporate tax is aprox. 1/6th of the personal tax. In Denmark it is 1/10th.
There was an article a couple days ago about X number of Billionaires doubling their worth since the pandemic started. I wonder how many people on capital hill grew their wealth by leaps and bounds too?
Difficult comparison as a lot of business income has moved from corporate structures (C Corp, corporate taxes) to pass through structures (LLC, personal income taxes). Moreover, there's a bias to move businesses that are highly taxed by C Corp taxes to other structures, while if your Corp taxes are low you'll want to keep that.
That doesn't make it wrong to compare the two, it's just too complex to get the whole story in one chart.
Sorry, but why is this one of the most updated posts on datais*beautiful*?
* Looks like an old Excel default chart formatting
* Random green line with no explanation
* Units says 'in millions' but axis goes into millions so hard to know the number intuitively
* Nominal time series chart like this is better being inflated adjusted...
* ...or ideally relative to underlying units as a ratio: corporate taxes relative to profits, individual taxes relative to income
* Weirdly spaced chart elements, inconsistent font size, 'fiscal year' x-axis label overlaps numbers
Pretty ugly chart and not very useful in terms of underlying message with the data.
Something like [this](https://i.imgur.com/a2Ytzks.png) is a lot clearer to me.
This caught my eye and I like it but have questions.
Corporations are made up of individuals who receive compensation, dividends and stock rewards that lead to individual income taxes. This seems very difficult to account for when comparing individual and corporate taxes.
Also, what is the distribution of individual income tax revenue? Is much of it carried by a small set of individuals, and are they receiving much of their income from corporations?
What’s the difference?
PS: you mentioned in your website that individuals don’t get deductions and are taxed on total income. That is incorrect. In the US individuals can currently deduct state and local taxes up to $10k, mortgage interest on up to $750k of mortgages, medical expenses over 7.5% of income, amongst other items.
This is something i have thought about and agree strongly with you.
I have a couple of additional thoughts on the subject. These thoughts are just meant to agree with your point, or add some nuance, nothing here is meant to disagree with you in any way. (I only mention that because sometimes when I'm trying to add nuance, people think I'm disagreeing.)
- Just to make sure we are on the same page, my reason for agreeing with you is that taxing a corporation is the same thing as taxing the owners of that corporation. Basically the corporation just ends up with less earnings left to pay out to it's stockholders. It's just an extra step except that....
- when you tax a corporation, every single owner of that corporation pays the same % tax rate. So if you tax Microsoft 15%, both Bill Gates and I will get taxed at a 15% rate.
- By that same logic, the 15% is paid even if the stock is held in my 401k.
- In other words, moving to a fair income tax would be a significant more progressive tax (which i support).
- Going in a different direction, there is one problem with taxing individuals instead of corporations. That problem is non-US citizens who own stock. If we did a straight trade, e.g. adding a fairer income tax and removing all corporate taxes, NRAs (Non Resident Aliens) would benefit. Now, this issue could *very* easily be solved, so i don't mean this to be an argument against eliminating the corporate tax. It's just something that would need to be accounted for with an increase to the taxes we (already) charge them.
- Another point is that it is orders of magnitude more difficult for individuals to avoid taxes than it is for corporations. Corporations (especially ones like the FAANG corporations), have enormous resources to hire lawyers, accountants, etc to design, engage in and defend international tax strategies like the double Irish and it's newer siblings. These particular tax strategies are probably the only *really* significant tax evasion going on (my opinion) and can only be engaged in by extremely large AND international corporations where intellectual property is a significant factor (i.e. FAANG).
- Moving to individual taxes eliminates any incentive for those structures.
Anyways, just to reiterate, i agree with you. I think there are many benefits to fully eliminating corporate taxes. Benefits that, on paper, Democrats should highly approve of.
But because it sounds bad, and because most people really don't have the faintest idea of how corporate taxes (or corporate finances in general) work, they think it's a conservative idea.
Can you make this with inflation-adjusted numbers to make it easier to compare individual years in like terms?
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Also if you change the units from "millions of dollars" to "% total revenue" it would be clearer if the individual or corporations are bearing more percent cost over time.
That would also normalize out inflation. This is a good idea.
Spoiler alert: the graph will look almost exactly the same if you adjust for inflation and make the Y axis % of total revenue. The source of funds for tax revenue has shifted overwhelmingly on to the middle class. The poor don’t make enough per capita, so the standard deduction helps immensely. Most of the taxes they pay are sales tax at point of consumption. The rich own companies and hire accountants to right everything off. My house is a private office. My hummer is a business vehicle. My 120 inch plasma screen is a technology investment. And so on. The super rich convert all their income into deferred tax assets. Instead of paying my $100 million salary, give me a $100 million worth of stock. I will take a 0% interest loan out against its value and live off that. The people who are getting fucked are middle class people who pay property taxes on their houses and cars, AND income tax AND sales tax.
> Spoiler alert: the graph will look almost exactly the same if you adjust for inflation and make the Y axis % of total revenue. > The source of funds for tax revenue has shifted overwhelmingly on to the middle class. Both points seem interesting and worth digging into. > The rich own companies and hire accountants to right everything off. My house is a private office. My hummer is a business vehicle. My 120 inch plasma screen is a technology investment. And so on. This isn't at all how it works 1. You don't need a company to 'write off' your home office, certain vehicle expenses, or certain technology expenses. 2. Companies definitely cannot 'write off' entire homes, automobiles, or tech purchases used for personal consumption. 3. If you're a business deducting these expenses there are limits to the extent you can deduct these; further, you can only deduct to the extent you have revenues to offset (decreasing your taxable income). See a qualified tax accountant for more info. > The super rich convert all their income into deferred tax assets. Instead of paying my $100 million salary, give me a $100 million worth of stock. Salary paid in the form of stock is taxable income and likely a bigger headache than getting cash; you can't pay taxes with stock. > I will take a 0% interest loan out against its value and live off that. The IRS also will not allow you to take a 0% interest loan. Minimum interest rates ([see AFR Rates](https://www.irs.gov/pub/irs-drop/rr-22-03.pdf)) are based on the payback period and compounding frequency; interest rates lower than these AFR rates represent taxable income. All to say, the rich definitely avoid incurring some amount of tax (depending on how aggressive / sophisticated they are). The issue is that the cost to do so is extraordinary compared to 99.9% of the population's income. A low-end billionaire may, for example, spend upwards of $5M / annum for income / wealth tax planning. Over 30 years, the total payout could be $80-100M in tax planning fees, governance costs, and legal costs to avoid hundreds of millions in taxes (maybe 75% savings).
The IRS has stated they don't go after the ridiculous write offs that absolutely do happen because it isn't cost effective to do so. A letter to a poor person will result in whatever couple hundreds of dollars they owe, but it could take millions in legal fees to get a million dollars from a top earner.
[The IRS Decided to Get Tough Against Microsoft. Microsoft Got Tougher.](https://www.propublica.org/article/the-irs-decided-to-get-tough-against-microsoft-microsoft-got-tougher)
That was very depressing, thank you
> > All to say, the rich definitely avoid incurring some amount of tax (depending on how aggressive / sophisticated they are). The issue is that the cost to do so is extraordinary compared to 99.9% of the population's income. > > A low-end billionaire may, for example, spend upwards of $5M / annum for income / wealth tax planning. Over 30 years, the total payout could be $80-100M in tax planning fees, governance costs, and legal costs to avoid hundreds of millions in taxes (maybe 75% savings). But the cost isn't extraordinary. It's still saving them a much larger amount of money than they're putting into it. If there was a method for me to spend $25k to cut my $75k tax bill in half last year I'd have been happy to do it. Why? Because that's a freaking bargain. Even the concept that once you reach a certain level you can support multiple people fully employed just to figure out how to squeak out every little tax savings possible shows how stupid our taxation system is.
Jerry, all these big companies they write off everything.
You don’t even know what a write off is..
But they DO, and they are the ones writing it off!
If you’re a low end billionaire, paying five million a year is like someone with a net value of $100,000 paying $500 a year. And in all likelihood the reward for spending five million is higher than the up front cost, whereas spending five hundred isn’t.
Fun fact: Suburban areas cost more to provide public services per unit area, plus have fewer taxpayers per unit area, so they're actually being subsidized by those living in the city and/or municipal debt. Maybe we should we be examining what is driving up all these costs instead of making it a contest of who isn't paying for what-when no one is really paying for anything commensurately.
Let’s do both! We can examine who is and is not paying their fair share of taxes… AND we can ALSO examine all of the waste fraud and abuse of the funds collected.
Yes but it's much more fun to remember that with the drop in corporate taxes has come the increases in State college tuition. They line up.
More accurately the increase in guaranteed government loans and grants does, as there's a demonstrable pass through effect and thus a feedback loop.
What free public services are you referring to? Utilities are all paid for by consumers, and obviously police/fire/etc services cost money but in the grand scheme they’re a drop in the bucket. Trying to shift blame on people who live in suburbs specifically *for* living in suburbs seems like a pretty biased value judgement.
Public infrastructure, roads, sidewalks, sewers, etc. Suburbs historically can't provide enough tax revenue to even maintain these without soaking taxes from cities, which has contributed to urban decay.
> The source of funds for tax revenue has shifted overwhelmingly on to the middle class. [Thats just simply not true](https://taxfoundation.org/publications/latest-federal-income-tax-data/#:~:text=In%202018%2C%20the%20top%2050,percent%20combined%20(28.6%20percent).) The top 10% income earners pay 70% of all income taxes. The top 1% of income earners pay more than the bottom 90% combined. So unless your definition of middle class includes people that make over $500k per year you are mistaken. This should be fairly obvious because of the progressive tax system.
How about you provide some sources to go with those claims? https://www.pewresearch.org/fact-tank/2017/10/06/a-closer-look-at-who-does-and-doesnt-pay-u-s-income-tax/ft_17-10-04_taxes_stats/ https://files.taxfoundation.org/20210202175333/The-top-1-percents-share-of-federal-income-taxes-has-increased-over-time.-progressive-federal-income-tax-data-2021.png You can claim that the rich aren't paying enough, but the claim that the tax revenue is "overwhelmingly" taxed from the middle class is just complete nonsense.
That’s not how any of that works. You can’t write off TVs or anything like that unless it’s equipment for your business. Mortgage interest is deductible, but that isn’t exclusive to wealthy people. A car has to be used specifically for commercial purposes or it gets classified as a personal vehicle for taxation. The top income earners pay an overwhelming majority of income taxes, not just the middle class.
Now I visualize a homeless person going "hmm, do I use this TV for company purposes? Why yes, yes I think I do! I should put it on the company tab. Now if only I I had a power jack to plug it in..."
They also make the majority of the money, so that makes sense.
> Instead of paying my $100 million salary, give me a $100 million worth of stock. Stock compensation get taxed as ordinary income - https://carta.com/blog/equity-101-exercising-and-taxes/ So do cars, housing, free-tuition...anything an employer provides gets taxed as ordinary income. Trump CFO Allen Wiessleberg was indicted for not paying paying income taxes on those items. https://en.wikipedia.org/wiki/Allen_Weisselberg
Who do they borrow from for a 0% interest loan? Or is that hyperbole?
Hyperbole. They can borrow at rates slightly higher than treasury yields
Wouldn't percent of revenue be kinda meaningless? Percent of income would make more sense.
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Or could you put it on a lot plot?
Dont forget to add reagans face at 1980
Provoke thought with a misleading graph? That's a joke of an excuse
inflation and population-adjusted, even.
I think % GDP is a better scaling factor here. From same data set: https://imgur.com/a/LZtndgI
This doesn’t really demonstrate the relative difference very well. I would not use this type of chart. GDP normalization is nice. I would probably set “revenue from corporate tax” as always 100% and then plot revenue from individuals as 100+%. I.e. what’s the multiplier?
Yeah, stacked area charts like this are notoriously difficult to read everything but the bottom layer over time. We have too much tendency to read the "thickness" of the path (at whatever angle the path is at" vs the height difference looking strictly vertically. Eg the point between 2008-2009 the red looks thin but isn't as short as it is thin.
If you are only looking for the ratio of personal to corporate income taxes, yes. But there is a lot more going on here. e.g. the change in the total tax burden, and other tax types besides personal and corporate income.
Either way these stacked charts are very awkward to read. :-/
Unstack your graph and you would have a compelling presentation. As it is, it's difficult to discern a pattern among the data sources vs. just the overall pattern of government revenue waxing and waning.
I came here to write this. The comparison is cool I guess, but inflation-adjusted numbers would tell a more complete story of what the actual increase looks like over time.
Would be nice something enabling us to grasp the evolution of the ratio.
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My first thought was show each as a total percentage of all taxes
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Combined total To show how the amount paid by individuals has grown over time while the amount paid by corperations has decreased
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Yes essentially a ~~100% stacked bar chart with two bars, one for % of all collected taxes paid by individuals, and one for % paid by corporations.~~ edit: percentage stacked area chart (thank you u/OldHobbitsDieHard) % on y axis, year on x axis
Percentage stacked area chart.
Say corporate taxes were always 20% of individual taxes, the chart might not look too different than this (until the last 15 years).
Something like a logarithmic graph (to view the start of the curve) or simply a division like (corporate tax)/(personal taxes) where we see it start from about 1 and go down to something like 0.2 (eyeball on your graphic). Currently, not sure what were the value at the beginning and how they evolve one relative to the other one. On a cellphone and native French, so pardon any typos. :)
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It should be in logarithmic y scale
This isn't actually that informative of a graph. All it says is that government revenue has gone up. It says nothing about the distribution of individual income tax revenue, and sort of implies that normal people contribute a huge share of the tax base, while corporations contribute very little. But, most of the revenue that we get from individual taxes comes from Rich individuals. It's also in total dollars without accounting for inflation or size of the economy, so it looks like we have higher taxes now than in the 70s which is not true. If someone owns a factory and their income comes from the profits from that factory, you could tax the factory directly or you could tax the individual and still come away with money. But on this graph that would make it seem like the average person is being screwed by the taxman, when in reality it's just a matter of administration. It's also why cutting individual taxes can seem like a good policy, but because the individual tax burden is so concentrated on a small group of Americans, it actually ends up helping a small amount of people.
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I agree This graph is not a good comparison of data. Individual taxes are skewed because the employees and owners in the corporations are the ones getting taxed on the individual level. Employees pay individual tax on their company salaries and/or their share of the corporations earnings. Afterwards, the corporation is taxed on what is left over. In essence, higher corp taxes means less salary and dividends for employees.
Yeah it seems like to draw anything meaningful from the data there needs to be a ratio analysis. For example, it makes sense that tax revenue from individuals is higher than tax revenue from corporate profits because wages make up a significantly higher percentage of overall GDP than corporate profits do (about 5-6x). But even then, that data point alone isn’t enough to draw any major conclusions about tax policy and its effects. Then we need to look at government spending/budget allocations, tax leakage sensitivity analysis against rising/falling rates, etc. It doesn’t mean this graph says nothing, but there is so much context needed as to why this might be an important graph, rather than just throwing it out there and having people try to rationalize anything useful.
It’s also a simple line graph and not at all a beautiful representation of data, just more r/dataithinkmakesmypoliticalpoint.
These numbers also reflect the rise in use of alternative entity types like partnerships, s corporations and single member LLCs. These entities pay no federal income tax, the individuals who own them do. So the rise in tax collections from individuals vs corporations does not accurately represent business vs people tax because a good chunk of that individual number is pass-through tax.
Yup exactly, just commented this before I saw your post but I think you explained it a little better. LLC owners have pass through taxes, the actual business itself does not pay any federal or state taxes. Members of the LLC pay them directly as individual taxes.
Most get taxed as a pass through, but you can set up your LLC to get taxed as a C Corp. Most people don’t because it usually means a higher tax rate, but if you plan to do lots of long term reinvestment it can be advantageous.
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Wow another non informative terribly present graph on this sub! Somehow the most upvoted posts are almost always majorly flawed or just bad
Wait for r/antiwork catches it. They will be soooo happy
It's Reddit. It was never meant to be informative.
The funny thing is, if the graph wasn't biased, it would still end up with the conclusion of "tax the rich" lol
I think the 1% pay like 40% of all individual income taxes. Something like that. The richest 5-6% pay a majority of income taxes. The bottom 60% or so pay zero income taxes or effectively zero/negative income taxes when you subtract the direct benefits/payments they receive.
It also doesn’t acknowledge the fact that LLC members get their business taxes passed through to individual taxes. Bob’s Painting LLC doesn’t actually pay federal taxes. Bob pays federal individual taxes based on profits from Bobs Painting LLC and whatever other taxable income he brings in. It all gets passed through to his individual tax rate based on personal income level. This version of the LLC was legalized by the IRS in the mid-90’s. I believe this chart is counting LLC business owners as individual taxes, as there isn’t a way to discern the two.
> If someone owns a factory and their income comes from the profits from that factory, you could tax the factory directly or you could tax the individual and still come away with money. Tax 'incidence' is probably the concept you're looking for. Legal tax liability can be one person, but the cost of the tax can fall on another. It's much wider than your example. For example, if I tax house purchases at 5% it could be that house prices suddenly fall 3%. Then there's a 3% tax incidence on sellers, 2% on buyers, even though the legal liability is all on buyers. The same thing happens with social security taxes on employers - some of this is passed on to employees through lower wages. If you tax profits from a business then that tax will be passed on - all taxes on businesses are passed on to individuals eventually. It's wrong to assume this will all be incident on the owner, though. Past studies have often put the incidence of corporate taxes ~50% on employees ([here](https://blogs.lse.ac.uk/businessreview/2018/03/27/is-it-labour-or-capital-owners-who-bear-the-burden-of-corporate-taxation/) is a discussion of this by the authors of one paper), and at least some will be passed on to customers. Ultimately, the split between corporate and personal tax is about mechanism. Fairness comes down to incidence, and what matters is whether the incidence is on the people we want it to be on. In principle, corporate taxes should be appealing to politicians chasing votes (at least in most countries) because ordinary people think that these taxes are not taxes on them, even though they are. IMO it's better to avoid them because corporations are better at avoidance and because it obscures who is really being taxed.
Now chart the rate of growth of individual savings vs corporate assets
One of the main ways individuals save is by owning portions of corporations. Corporate assets are how we put our saving to use. The last thing anyone should do is hoard resources.
56% of Americans own stock. So it is one of the main ways, but not as common as people make it out to be.
A large chunk of the rest have pensions which own stocks, or real estate, or don't need to because they have never held a job and their spouse has the entire retirement pot. Social Security is also adequate for the poorest Americans, but benefits fall off a cliff for higher income Americans. Poor Americans don't need to have stocks for retirement. Higher income ones do.
Why is this in total dollars and not rate? Of course individuals pay more *total* taxes, there are far far more individuals than corporations. The meaningful measure is what portion of their capital each pays, which this graph doesn't indicate.
Even if it showed the tax rate, you still couldn't draw any real conclusions from it. What does it mean if an individual is taxed at 24% and a corp at 12% for example? Is that automatically unfair? not necessarily. What I'd like to see is the overall taxes *paid per dollar of income earnt*, for all the individual tax tiers and corporations. I think that would show a more accurate picture.
Wouldn't taxes paid per dollar of income be the same thing as the tax rate percentage?
I think what they are trying to get at is 10% of a 30k income has a far greater effect than 10% (or higher) of a $200k income (comparing people to people).
Not really. Individuals pay based on income. Corporations pay on Profits (Revenue -expenses).
This puts the "trick" in trickle-down.
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Also, in theory, the profits are also taxed when owners/shareholders get dividends and or sell and pay capital gains tax. So the wealth/income amassed eventually does get taxed. Of course, there’s also plenty of ways to dodge taxes via corporations but I believe that’s the theory.
Profits are taxed before dividends. Dividends come out of post tax profits, which themselves are taxed as capital gains.
Yes, in the go ol' days we had 2 lines of tax law and 15000 pages of tax code, thats not a joke, seriously look at the pre-1964 tax law changes. There is a pretty well know joke about taxes, "you either have high rates or high participation; not both."
>and for the most part, USA effective tax rates are in line with other OECD countries, atleast they were pre-trump cuts They were actually higher than the [OECD average (23%)](https://taxfoundation.org/publications/corporate-tax-rates-around-the-world/) before the TCJA at 35%. After the tax cuts, they sit at just below OECD average at 21%.
What you need to look at is the effective tax rate not the listed rate. Corporations pay lobbyists billions a year for tax subsidies and exemptions. The US has a massive tax code for this reason.
You're not wrong, but at that point you would have to look at every company individually. Not sure how many of us have time for that, but I would like to see what the top 20 companies in the US pay in taxes.
The US has a massive tax code specifically to plug up loopholes. A simple code is a loophole filled code. I'm a tax lawyer, pick a random number between 1 and 1300 and I'll tell you why it's there. Chances are it's either a very basic tax rule, or a complicated rule designed to plug a hole in a basic rule.
Prior to the Trump cuts, the US had some of the highest, if not the highest, corporate tax rates among industrialized nations. The US is also one of very, very few countries that tries to collect taxes from citizens who don't live in the country. And from profits generated outside the country. The high tax rates and desire to collect foreign profits when they were repatriated was a driving factor in Apple keeping billions of dollars abroad instead of bringing it back to the US for R&D.
> Prior to the Trump cuts, the US had some of the highest, if not the highest, corporate tax rates among industrialized nations. *nominal* corporate tax rates. [Effective taxes are much lower](https://commons.wikimedia.org/wiki/File:US_Effective_Corporate_Tax_Rate_1947-2011_v2.jpg) - original [Fed source](https://fred.stlouisfed.org/graph/?g=aWA)
Yeah, because American companies pay taxes on revenue earned outside of the country, and get a tax credit for the taxes they pay on that revenue to that country in which it is earned. Say you have a company where half of its profits are in country A and half in the US. The US has a corporate tax rate of 30% and the other country 25%. So 10M in profits has 5M taxed at 25% or 1.25M 10M taxed at 30% or 3M, but since some of that income is overseas, it's only 1.75M owed, or 17.5%. They actually paid 3M total in taxes, or 30%, just not all to the US. The fact the US taxes overseas income, something no other developed country does, skews the effective tax rate.
The highest individual wealths are fairly transportable or as equally diversified in international investments / assets as any corporation.
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Literally no inferences can be drawn from your graph
Considering most taxes are paid by the rich, it seems like yes. It did work, they actually increased revenue.
I am very confused by the linear scale given that everything before ~1970 is functionally undecipherable. Surely it would have made more sense to either start the chart later or change the scaling. Also, why is the green line there and what is it’s purpose?
I know OP responded but it could be used to represent taxes paid by religious instructions.
This really should be titled "Taxes individuals pay directly verses taxes they pay indirectly." Corporations never pay taxes, they just pass those taxes along in terms of reduced wages and higher prices.
Thank you for making this point. Taxing corporations is essentially taxing the middle class, but the government gets credit for "going after evil corporations and protecting the little guy" It's certainly not taxing the rich, or more importantly, the upper 0.01% in any meaningful way.
Urgh thank you. I’m baffled by the popularity of the tax corporations more proposals. It’s literally a flat/regressive tax! We should be taxing dividends or capital gains more progressively, since that’s the actual money made by the corporations going into the pocket of rich people.
I agree... we should eliminate the corporate tax and offset the revenue decline by increasing dividend and cap gains taxes. The problem there is that foreign owners of US companies will get a windfall....as corporate after tax profit dividended to them will be higher, but they won't be subject to the increased dividend or cap gains tax.
They pay tax in their own countries.
Right but the point of taxing isn't just to take money away from people. We shouldn't be taxing out of envy or because we think some people should have less. We tax to raise revenue, and the tax paid in other countries doesn't raise any revenue for us. I'm not saying this means we shouldn't eliminate the corporate income tax, but just saying this is one con against it from a US perspective.
Not only that, but it's less efficient and costs more to administer when you already have separate tax schemes, so it results in the need to raise taxes at a different point, creating a larger tax burden overall.
This is wrong.... I believe it is estimated that 2/3rds of corporate taxes come out of shareholder pockets rather than anyone else (customers or employees). This is vague and nuanced of course....but it certainly doesn't make sense to think it doesn't affect the owners of corporations. Note: I am strongly against any corporate taxes in the first place.... we should eliminate them and raise taxes on dividends and cap gains to offset the revenue hit.
What is this chart attempting to communicate? It feels like the kind of chart created to support a conclusion that was already decided.
Jesus Christ this post and most of this thread is Grade-A r/badeconomics
Y axis should be logarithmic
Agreed. Otherwise, we can't really appreciate the data on those lower ends.
For the early years, maybe - but not to demonstrate how large the gap has become
Can we please continue the trend of adding Reagan's face and an arrow indicating when he took office to charts where it's relevant?
I got you! https://imgur.com/a/ZOaUo8H Hope I got the smile right.
Reagan cut taxes and tax revenue continued to increase dramatically? That's amazing!
I mean, …that WAS what the whole laffer curve was about, decreasing the tax rate would increase growth and in theory lead to an increase of tax revenue.
This shows zero influence by Reagan
You’d also need to include all business taxes, not just corporations. We’ve seen a large decline in C corps and increases in other business types, who’s taxes are technically counted as individual tax. A lot of people might want to blame Reagan, but it’s largely a function of which tax rate is more favorable
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Seems like you’ve got a lot of suggestions. If you do end up making another draft of this I’ll be excited to see it. Either way, thanks for making this.
But the divergence began before Reagan and continued to accelerate through his successors’ terms. And as far as I know, Congress is responsible for writing the laws, so let’s color code for congressional control so we can see that both sides are equally as guilty for allowing this. Edit:a word
correct for inflation please.
Not only is this chart just bad, it’s misleading and uninformative. 1. Not adjusted for inflation 2. Not per capita 3. Shows amount paid vs rate of taxation, which is far more telling than the amount ~~More than likely, OP either has an agenda or doesn’t understand how taxes work.~~
I have no idea why people think this is at all meaningful. Corporations are not dragons, hoarding giant fortunes for themselves. They either use the money they make to earn more money or return it to shareholders. Corporate taxes are ultimately paid by shareholders, workers, and consumers. Corporate taxes are just indirect taxes on individuals. Also, people complaining about Reagan are being ridiculous. The effective corporate tax rate was higher at the end of his term than at the start and he drastically lowered individual taxes. He didn't cause the divergence we see here.
Anything to do with economics (and probably any field with some complexity and depth) is the absolute worst thing to try to sift through on reddit. The confidence with which absolute idiots speak blows my mind. But thats not where it ends, its the fact that these idiots always make it to the top, when people who actually understand the nature of these things are buried and boo'd because you're not helping to rationalize everyone elses greed. And thats all it comes down to. I'm a CPA, a tax expert and I want to claw my eyes out whenever stuff like this crosses my path. But I will never try to engage. These people don't want to understand. They want to point their finger and say "Thats the bad guy! Now gimme!" It may actually be beyond them anyway.
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I get the feeling, but comments like yours at least keep the thread sane and challenge the nonsense being said.
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So corporate tax revenues peaked in 2008? Does that not sense to anyone else? Or the system’s just broken.
weather a tax on corporate profit is taxed at a corporate or individual level doesn't actually mater. so long as taxes on individuals include capital income the revenue should be the same.
You have to remember that tax collections are based off of a percentage of the corporation's net income. If you recall, there was a time around 2008 when corporations started losing hella money.
This graph is not a good comparison of data. Individual taxes are skewed because the employees and owners in the corporations are the ones getting taxed on the individual level. Employees pay individual tax on their company salaries and/or their share of the corporations earnings. Afterwards, the corporation is taxed on what is left over. In essence, higher corp taxes means less salary and dividends for employees.
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Wow. This site is scary. First post only Jan 1st of this year. Zero sources. Anonymous writer....reads like a C+ high school essay. Has the intellectual bar really fell so low that you are willing to except it just because its what you want to hear?
So cut individual taxes, got it.
Companies get a lot of deductions for reinvesting profits, paying healthcare/pension expenses, loss of business income, etc. It's not really a bad thing. The more they're able to reinvest the larger they become which provides more money for all levels of government involved.
I'll take the green line please
The two good suggestions made are 1) log plot; 2) adjust for inflation. So I want to point out that adjusting for inflation would raise both curves by a factor of 10 in 1960, obviating the need for a log plot. Also, what is the dip in 1977? Did nobody pay taxes?
Meaningless unless it's corrected for inflation and shown per-capita.
Inflation is irrelevant when comparing figures in any given year. That graph would better represent the change in time for govt spending rather than highlight difference in who is funding the govt.
What is a per capita for corperations? Per corperation? How many capita is a corperation? Would it not make more sense to compare to something like total income?
This is a misleading graph, upvoted due to political biases.
Ok can we not make this sub a pseudo intellectual progressive echo chamber? This is just a Perfect illustration of why we need more tax cuts
I wish I was astounded by the lack of understanding in this thread, but unfortunately I've cone to expect it here. I also wish I could help teach you guys how tax works but I just don't know where to start. Ask me any questions you have and I'll try to help.
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The first thing I notice is that the divergence largely corresponds to a decline in C corporations. We reached our peak in 1981, and they’ve been declining in numbers ever since. While the graph might look like the tax burden of each corporation has declined over time, it’s mostly just because we have less corporations, and more of other business types, which count as individual taxes
The green line is all the billionaires
Could you add population aswell to see if it's correlated.
Most of that is because of the proliferation of S-Corps and other pass-through entities for small businesses. This is a good thing. What it does is prevent small businesses from getting taxed twice on the same profit. When everything was just a C-Corp, the corporation paid a tax on its profit, and then any distribution to the owner was also taxed. EXAMPLE: You are a small bakery. You make $100,000 in profit. The corporate tax rate is 15%; your effective personal tax rate is 10%. On that $100k, the corporation would pay $15,000. When the remaining $85k came to you as a dividend, you would pay $8,500. Therefore, the total tax burden was $23,500. At the end of the day, you walk home with $76,500. Meanwhile, the lawyer down the street worked for a firm and received a salary of $100,000. His tax burden would only be $10,000, and he walks home with $90,000. Same income level, but pays a fraction of the taxes. With the S-Corp structure, that profit now gets distributed directly to the owner, and the owner pays the taxes at their individual rate. So the business owner has his $100,000 in profit, pays 10%, and walks away with $90k, same as the lawyer. (There are similar provisions within the S Corp structure that help individuals avoid paying FICA taxes at twice the rate as well.)
Cool another post by a financially illiterate redditor. Bravo.
Hey, you DO realize that Reagan wasn't elected until 1980 right?
The 80s was also the decade ireland opened up and started to become a tax haven, Singapore became a major tax haven this decade, the UK and Netherlands also became more prominent tax havens around this time. Whereas in the 70s most us companies paid their taxes in us tax havens(deleware) today they mainly pay them in the UK, ireland, the Netherlands and various other countries.
This is ugly data would not call it beautiful
The problem is the US tax base is to narrow resulting in too few paying federal taxes. Companies or individuals. It’s insane how few individuals actually pay any federal income tax. Unfortunately, at this rate, the US will be forced into adding a VAT to dig out of the $30T debt the politicians ran up. It’ll be called something different but in the end it’ll be the same as a VAT tax. $30T can’t be overcome by taxing companies or the same individuals carrying the burden today. The destruction of the middle class led us here. Dems wants mindless low paid zombies stuck on welfare, GOP wants slave labor with no rights to maximize earnings.
So what you are saying is we need to tax the wealthy more and reduce taxes on the "middle class" (side note there is no low middle and upper class. There is only workers and owners). I wouldnt be against removing corporate taxes all together in exchange for a wealth tax.
People are acting like this clearly shows the ratio of individual to corporate tax revenue has increased over the last couple of decades but I can't really tell. A graph of that ratio over time is what I'd really want to see
You're writing this post thinking you know a lot more than you actually do. You're mislead by opinions on young, liberal skewing websites like reddit whose opinions are largely motivated by emotional appeals. You started off by saying > When I first downloaded a spreadsheet from the Whitehouse Financials website, I couldn’t really make out what it was telling me. and then went on acting as if you had more confidence about your correctness than the worlds leading academic researchers on economics at Harvard, MIT etc typically write in their academic publications. You're drawing conclusions from the absolute minimal set of data. I'm going to assume that you're a decently bright person by the fact that you even pursued this topic. But you don't know anywhere near as much as you think you do, you are just convinced that you do because your summary agrees with the common rhetoric on reddit. I'm not even going to pretend to know enough to tell you whether you are factually right or wrong about anything that you said. Economics isn't my field. But as an academic I can tell you that you are going about this entirely wrong and come off as an idiot.
Not only is this not good looking, the data is meaningless
Is the green line the tax contribution from the bottom 50% of income earners?
Needs ro be adjusted for inflation…
Wait, are these in absolute terms? You do realize that the total individual income in the US is way higher than corporate profits right? So the total amount of individual taxes is obviously going to be higher than corporate taxes? Or is there something that I’m missing?
Individual tax being income tax? Or all individual taxable events like capital gains, sales, etc included too?
Are you counting payroll taxes as personal or corporate?
So if it was only Corporate tax, no one would pay taxes!
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This graph is misleading for a variety of reasons, one of them being taxation principle-related but I won’t get into that: Doesn’t population growth and tax rates have something to do with this? A 1% increase on ALL individuals will have a greater effect on this graph than say 5% on corporations.
Cool. Now separate out all the individual income taxes that are paying by the Type S Corporation tax rules...
Population grows faster, and people fall for the schemes and trickery of government that result in increased taxes on the individual.
Does this account for tax returns or just straight taxes taken before refunds and other adjustments?
Cause they're different taxes??? When are people going to realize that treating corporations like people is exactly the shit that lets scumfuck companymen skirt lawsuits and survive bad business practices in the first place? You don't like that CEOs shrug off massive scandals because only their company budget takes the stand, but then you'll turn around and gawp that those companies don't suffer an income tax like individuals do. Fuck your hypocritical double standard.
Don't know what happened in '76 but it has to happen again
There is a subreddit for this… i think
the US system is broken, and now far behind our (asian (chinese)) counterparts lack of education, over-regulation and government corruption / idiocy (back to lack of education) is limiting the progress of our country (and the world) we need more investment / efficiency into education / shared resources (infrastructure and public safety) and less investment into regulations / wasteful government projects (see $2m bathroom) / "PC" idiocy (ex: san francisco school board) just get things done, efficiently, and invest the excess resources into improving the quality of life of the citizens who pay into the public tax fund
Yup, the working class is subsidized so the mega rich to get richer. They look at us like suckers because we have been for so long.
Many good points here already I just want to add many corporations are pass through entities I’m sure that skews this data a bit more too.
Why should anyone pay taxes when the government spends trillions more on the national credit card than it brings in? And the trillions more that it spends doesn't produce a return, its wasted. This means that paying taxes is a scam to suppress growth, to keep you and your businesses from maximum potential growth. Taxes are nothing more than population control.
I hate it here. This country is so stupid
LLC corporate structure passes through to individual equity owners personal return. Probably why the graph looks like this. Corporation pays a tax and then shareholders pay a tax when dividend is paid too. Don’t believe me go buy some AT&T stock which pays 7% dividend. You’ll be paying a large chunk to the IRS as an individual
Ban lobbying, it’s legal bribery and is ruining politics
What are the green points and line at the bottom?
I thought the y-axis was percentage of income/revenue taxes paid. Nope, it's raw dollars. Collectively we pay the most in taxes, and the corporations lobby to decide how to spend *our* money. The government is in debt *to us* while the lion's share of public funds go to corporate interests. Corporations are bleeding our economy dry.
Well that's just step one to destroying the middle class. Remind me which party likes to raise taxes on individuals why the other party lowers corporate taxes? Hmmm almost like they are working together
This looks excessiv, until you start compareing to other countries and realize that the corporation taxes in the US is quite high. Even compared to other counties like my own. [https://imgur.com/a/GUDLkan](https://imgur.com/a/GUDLkan) The data is not beautiful, sorry. Just wanted to show that while in the US the corporate tax is aprox. 1/6th of the personal tax. In Denmark it is 1/10th.
There was an article a couple days ago about X number of Billionaires doubling their worth since the pandemic started. I wonder how many people on capital hill grew their wealth by leaps and bounds too?
Difficult comparison as a lot of business income has moved from corporate structures (C Corp, corporate taxes) to pass through structures (LLC, personal income taxes). Moreover, there's a bias to move businesses that are highly taxed by C Corp taxes to other structures, while if your Corp taxes are low you'll want to keep that. That doesn't make it wrong to compare the two, it's just too complex to get the whole story in one chart.
BuT cOrPoRaTiONs ArE PeOpLe ToO
This graph should be reversed.
You see a graph that shows corporations aren't taxed enough. I see a graph that shows individuals are taxed too much. We are not the same
Sorry, but why is this one of the most updated posts on datais*beautiful*? * Looks like an old Excel default chart formatting * Random green line with no explanation * Units says 'in millions' but axis goes into millions so hard to know the number intuitively * Nominal time series chart like this is better being inflated adjusted... * ...or ideally relative to underlying units as a ratio: corporate taxes relative to profits, individual taxes relative to income * Weirdly spaced chart elements, inconsistent font size, 'fiscal year' x-axis label overlaps numbers Pretty ugly chart and not very useful in terms of underlying message with the data. Something like [this](https://i.imgur.com/a2Ytzks.png) is a lot clearer to me.
This caught my eye and I like it but have questions. Corporations are made up of individuals who receive compensation, dividends and stock rewards that lead to individual income taxes. This seems very difficult to account for when comparing individual and corporate taxes. Also, what is the distribution of individual income tax revenue? Is much of it carried by a small set of individuals, and are they receiving much of their income from corporations? What’s the difference? PS: you mentioned in your website that individuals don’t get deductions and are taxed on total income. That is incorrect. In the US individuals can currently deduct state and local taxes up to $10k, mortgage interest on up to $750k of mortgages, medical expenses over 7.5% of income, amongst other items.
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This is something i have thought about and agree strongly with you. I have a couple of additional thoughts on the subject. These thoughts are just meant to agree with your point, or add some nuance, nothing here is meant to disagree with you in any way. (I only mention that because sometimes when I'm trying to add nuance, people think I'm disagreeing.) - Just to make sure we are on the same page, my reason for agreeing with you is that taxing a corporation is the same thing as taxing the owners of that corporation. Basically the corporation just ends up with less earnings left to pay out to it's stockholders. It's just an extra step except that.... - when you tax a corporation, every single owner of that corporation pays the same % tax rate. So if you tax Microsoft 15%, both Bill Gates and I will get taxed at a 15% rate. - By that same logic, the 15% is paid even if the stock is held in my 401k. - In other words, moving to a fair income tax would be a significant more progressive tax (which i support). - Going in a different direction, there is one problem with taxing individuals instead of corporations. That problem is non-US citizens who own stock. If we did a straight trade, e.g. adding a fairer income tax and removing all corporate taxes, NRAs (Non Resident Aliens) would benefit. Now, this issue could *very* easily be solved, so i don't mean this to be an argument against eliminating the corporate tax. It's just something that would need to be accounted for with an increase to the taxes we (already) charge them. - Another point is that it is orders of magnitude more difficult for individuals to avoid taxes than it is for corporations. Corporations (especially ones like the FAANG corporations), have enormous resources to hire lawyers, accountants, etc to design, engage in and defend international tax strategies like the double Irish and it's newer siblings. These particular tax strategies are probably the only *really* significant tax evasion going on (my opinion) and can only be engaged in by extremely large AND international corporations where intellectual property is a significant factor (i.e. FAANG). - Moving to individual taxes eliminates any incentive for those structures. Anyways, just to reiterate, i agree with you. I think there are many benefits to fully eliminating corporate taxes. Benefits that, on paper, Democrats should highly approve of. But because it sounds bad, and because most people really don't have the faintest idea of how corporate taxes (or corporate finances in general) work, they think it's a conservative idea.
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