8537
VIP Member
Here is the difference, for me this topic is logic and for you it's religion. There is no way you've ever taken a finance class. I just specifically addressed this. And the answer as I told you is to stop punishing companies with the highest taxes in the Western world. Your solution of not addressing that but trying to tax people for taking their money out seeking a better investment is DOA to a critical mind.
Liberalism, wow. Socialism is the magic elixir, it's more capitalist then capitalism. Problem is we keep following your path more and more and the economy gets worse and worse. If it's the magic cure all, why can't it cure anything?
We don't have the highest taxes in the Western world. We happen to have one of the highest marginal rates, but effective rates (actual paymens) are quite low compared to most of the Western world.
Link please.
Explain the difference in your own words.
This link explains the situation in detail: http://www.cbo.gov/ftpdocs/69xx/doc6902/11-28-CorporateTax.pdf. You'll see that, among other data, the OECD average corporate tax revenues were 2.5% of gdp in 2002. US corporate tax revenues were 1.8 of GDP in 2002. At that same link, you can see that higher corporate tax rates are associated with higher gross fixed capital formation.
In my own words...
The marginal tax rate is simply the tax rate assessed on the last dollar of taxable income. It says nothing about what income is taxable, nor does it say anything about what types of credits, deductions etc...are available.
The effective tax rate is the actual rate an individual or a company pays.
For instance, I think we can both agree that a person making 2 million dollars per year is in the top income bracket. It is very likely that they are paying .35 cents of his last dollar in taxes to the government (unless his income is from capital gains).
However, his effective tax rate is not 35%. First, he deducts his mortgage interest, his kids, his yada yada...then, he pays 10% on the first $8K or so. He only pays 15% on the next 15K or so. I don't have the exact marginal rates in front of me, but you get the idea. He is only paying 35% on taxable income - and then, only on taxable income above $374,000 or so.
His effective tax rate, therefore, is much lower than 35%.
In the corporate world, companies only pay taxes on certain profits. Like couples taking a mortgage deduction, in the US companies take deductions for various things. Those deductions are more generous then other places in the world, and the portion of revenues exposed to the tax is smaller than in other places. Therefore, even though our top marginal rate is high our effective rate is lower than many European countries.
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