EconomicNudity
EconomicNudity.com
Unfortunately, an understanding of the code is somewhat required considering Piketty uses U.S. tax data in his income inequality analysis. It seems he above all others would educate himself on the matter since it is the foundation of his findings. Unfortunate for himself he hasn't - and I understand because it is not easy.
First, the business owners out there may understand how some of this works If you don't - now worries. Unless you're a tax CPA (I am), it really doesn't require your understanding. To start, if a company is structured as an LLC, partnership, or as an S-Corp - they do not pay any federal income taxes. That's correct - these entities do not pay ANY federal taxes. The only business entity that pays taxes is the C-Corporation. If you don't believe me, Google the tax forms each entity files - C-Corp (Form 1120), S-Corp (Form 1120S), partnership or LLC (form 1065), or sole proprietorship or single member LLC (Schedule C). THE ONLY FORM YOU WILL FIND "TAX DUE" IS THE C-CORP.
What in the hell difference does it make? Actually, it makes every bit of difference. You see, S-Corp's and partnerships are referred to as "pass-through" entities meaning that the income they earn passes through to the individual to report on his own 1040. The S-Corp and partnership record the partner's share of income and expenses on Form K-1 which in the end is reported on form 1040 - the individual tax return (i.e. the source of where Piketty derives his information).
With tax reform of 1986, individual tax rates declined - a decrease continuing through 1988. With lower individual rates, it was a smart business decision to transition your business from a C-Corp (taxed at corporate rates) to a pass-through entity taxed at individual rates.
First, the business owners out there may understand how some of this works If you don't - now worries. Unless you're a tax CPA (I am), it really doesn't require your understanding. To start, if a company is structured as an LLC, partnership, or as an S-Corp - they do not pay any federal income taxes. That's correct - these entities do not pay ANY federal taxes. The only business entity that pays taxes is the C-Corporation. If you don't believe me, Google the tax forms each entity files - C-Corp (Form 1120), S-Corp (Form 1120S), partnership or LLC (form 1065), or sole proprietorship or single member LLC (Schedule C). THE ONLY FORM YOU WILL FIND "TAX DUE" IS THE C-CORP.
What in the hell difference does it make? Actually, it makes every bit of difference. You see, S-Corp's and partnerships are referred to as "pass-through" entities meaning that the income they earn passes through to the individual to report on his own 1040. The S-Corp and partnership record the partner's share of income and expenses on Form K-1 which in the end is reported on form 1040 - the individual tax return (i.e. the source of where Piketty derives his information).
With tax reform of 1986, individual tax rates declined - a decrease continuing through 1988. With lower individual rates, it was a smart business decision to transition your business from a C-Corp (taxed at corporate rates) to a pass-through entity taxed at individual rates.
