Since January 1, 2018, the nominal federal corporate tax rate in the United States of America is a flat 21% following the passage of the Tax Cuts and Jobs Act of 2017. State and local taxes and rules vary by jurisdiction, though many are based on federal concepts and definitions.
Profitable American corporations in 2018 collectively paid an average effective federal income tax rate of 11.3 percent on their 2018 income, barely more than half the 21 percent statutory tax rate.
The corporate tax in the US was cut from 35% to 21% in 2018, which is a huge cut, but what kind of difference has it made in the amount of tax gathered?
Average tax isn't the whole picture, because some companies that earn more will pay a higher tax, but it is still quite telling:
2010: 12.6%
2011: 12.1%
2012: 11.2%
2013: 11.4%
2014: 10.9%
2015: 10.8%
2016: 10.4%
2017: 8.7%
2018: 8.8%
2019: 7.8%
2020: 7.8%
I wish I could reduce my tax percentage by 60%.
And herein lays the question,
There are a lot of loopholes in taxation for corporations and this increases with the globalization of the economy and the corporations, as they are able to use complex accounting processes to effectively "hide" income and reduce their liabilities. This profit then gets distributed to shareholders and also used to invest into more generative activities. Yet, the average person doesn't have access to any of these loopholes and mor than that, they have to pay their tax monthly, automatically taken out of the salary by their employers. What this means is that while the corporations and subsequently the shareholders have more capital to invest, the average person has less, fueling the widening of the wealth gap.
But, what it also means is that the individual country governments have less available tax income and the way the accounting practices work, means that a lot of it is out of reach. A company is able to earn a billion dollars in one country and pay almost zero tax on it in the country it was earned. This results in an extraction process, bleeding wealth from one country into the hands of others, lowering the value of that country, making it a better buy opportunity for the investors who have been involved in the extraction.
Make sense?
With governments funded by tax income, they have to increasingly tax the population, not the corporations. If however, that lost tax corporate income could not only be captured, but gathered at the point it was made, a lot of the extraction would stop, leaving more income available to offer tax breaks to the citizens, rather than for the corporations and shareholders. This doesn't mean that the shareholders miss out altogether though, because when people have more money in their pocket, they will spend more, as we have seen over the last few years with all the handouts.
The difference would be that the "handouts" are made through tax breaks for individuals, incentivizing not only working, but also encouraging spending. And instead of funding them through debt (which effectively is future tax of citizens), the breaks are funded through corporations paying their full liability, rather than reducing it by 50%. The extra money in the pocket will still flow through to the corporations through consumer demand, but more of it will be returned back into the system and, there is far more opportunity for individuals to also be investors.
This last point is very important, because currently many people don't have the "luxury" to invest into generative activities. Given additional tax rebates, it would be possible for many more to start investing into the companies they are demanding from, further closing extractive circuit and feeding more back into the pockets of people. This starts to balance the distribution of wealth across an increasingly large portion of the global population.
Not only that, the distribution isn't just of wealth, because when the tax money is collected locally and the people are spending locally, there is far more value being circulated at the local level. This results in a spread of benefits to larger groups of the community, incentivizing and empowering local activity and communities to act locally themselves and improve the local situation.
Currently, this doesn't happen, because the vast majority of wealth is going into a narrow set of pockets, which makes it very much like a monopolized system, which fails because the centralized core cannot adequately take into consideration and cater for the many needs of the broad community. Instead, they make the decisions that improve their position first and foremost. Like any dictatorship, they look to shore up their powerbase.
While taxes aren't going anywhere soon, there has to be massive reform to the system in order to reverse the consolidation of wealth into fewer hands. This doesn't happen through handouts based on debt, it has to come through a restructuring of the tax system so that the wealth from corporations and investment is being used to fund economic capabilities in the entire population. Essentially, there needs to be a decentralization of wealth mechanisms so that more people are benefiting from the system, rather than more people falling into a debt trap cycle, as it is now.
Centralization versus decentralization is the biggest war being fought and will be for the foreseeable future, though many people are yet to realize what is going on or how they are going to be affected by it. What is goo to remember is that we have been conditioned into believing that the current economic system is the way it has to be, making change seem far more difficult than it might actually be. As the consumers at all levels, it really is up to us to demand a better system, which will ultimately mean changing the way governments operate, corporations operate, and we operate. It is a paradigm shift of monumental proportions, but we don't seem to have the appetite to take responsibility and start the reversal.
At the current rate of change,
We are screwed.
Taraz
[ Gen1: Hive ]
