19-05-2003 12:09									#1
	US corporation tax rates Suffering from ads?

I am doing an assignment, which, among other things, requires US tax rates on corporation profits. I tried looking on the IRS website, but they are well hidden somewhere. Does anybody have a good pointer to it?

A related question is: do US states tax corporate profit also, or is it strictly a Fed (IRS) thing?

	19-05-2003 17:47									#2
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US states tax corporations, and not only just on profit. South Dakota, for example, charges corporations a sales tax of 6% on all sales in SD, regardless of what the corporation does.

The basic federal corporate tax rates are:

http://www.irs.gov/pub/irs-pdf/i1120_ay.pdf

(Page 17)

Income range = Tax + % of the amount over $X

$0/$50k = 15% + $0
$50/75k = $7,500+ 25% of the amount over $50k
$75/100k = $13,750 + 34% of the amount over $75k
$100/$335k = $22,250 + 39% of the amount over $100k
$335/10m = $113,900 + 34% of the amount over $335k
10m/15m = $3.4m + 35% of the amount over 10m
15m/18.3m = $5.1m + 38% of the amount over $15m
18.3m - onwards = taxed at a flat 35%.

For example, Urban Ranging Enterprises, a Chapter C corporation, earns $200,000 in taxable income. Your tax would be

=$22,250 + ($100,000*.39)
=$22,250+ $39,000
=$61,250

or a 30.6% tax rate on your income. The remaining funds, if they get paid as dividends to Urban Ranger, get taxed again at the personal capital gains rate, making the effective tax on corporate profits as high as 50%... and that's before the states and the local governments take their share.

Hope this helps!

	19-05-2003 18:23									#3
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The biggest difference in Federal comporate income tax rates from individual is capital gains. In coporations these are taxed at a maximu 36% rate, rather than the the 20% (10% for lower incomes) rate for individuals.

	19-05-2003 19:00									#4
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Thanks all

	19-05-2003 19:08									#5
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In the Federal Budget, income tax and corporate tax amount respectively to :

1994 : 543.1 and 140.4 Billions $
2002 : 858.3 and 148.- Billions $

	19-05-2003 19:21									#6
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Is there any country of Earth that simply doesn't have taxes?

	19-05-2003 20:09									#7
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quote: Originally posted by red_jon Is there any country of Earth that simply doesn't have taxes?

Monaco. Instead it uses the profits from its casino.


In the corporate-tax argument, what no one points out is that, under the law, a corporation is its own person. However, unlike me & you, it doesn't get taxed on its income, it gets taxed only on its profits. O, if I were only to be taxed on the money I have left after expenses!

So yeah, corporations pay federal taxes and state taxes too.

What Bush's new tax plan wants to do is to make the transfer of wealth from the corporate person to its shareholders a tax-free transfer. That is, the shareholders will not have to pay income tax. Better, if the transfer of wealth from the corporate person to its employees were made tax free. That way, the workers wouldn't have to pay income tax.

By the way, if the shareholder really want tax-free income from the corporation, all they have to do is make it a partnership. Presto, a partnership is its owners, and so there's not transfer of weath. Of course, unlike a corporation, the owners of a partnership are personally liable for the partnership's debts.

	19-05-2003 20:46									#8
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Thanks much.

One more quick question, has the tax rate been changed in the recent years, some time in the 1990's?

	19-05-2003 21:10									#9
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I've come to the conclusion that the less the wealthy are taxed, the more they use to pamper themselves. They have no inclination of trickle-down.

"Oh looks like I have that extra $6 million in my business this year, time for bonuses for the management! I always wanted that cottage on the lake and my own private jet!"

	19-05-2003 21:20									#10
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quote: Originally posted by red_jon Is there any country of Earth that simply doesn't have taxes?

Interesting queston. I think Alaska has a negative income tax because of its oil. I wouldn't be surprised if the same exists in the Persian Gulf region for the same reason.

	19-05-2003 21:31									#11
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quote: Originally posted by JohnT The remaining funds, if they get paid as dividends to Urban Rangerget taxed again at the personal capital gains rate,

Actually, dividends are taxed again at the individuals regular income tax rate, not at the lower capital gains rate. (iirc)

	19-05-2003 21:50									#12
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quote: Better, if the transfer of wealth from the corporate person to its employees were made tax free.

That is considered a buisness expense so the coorporation doesn't get taxed on it. Maybe I read it wrong, and your trying to say not to tax on income of employees... that wouldn't work.

quote: By the way, if the shareholder really want tax-free income from the corporation, all they have to do is make it a partnership. Presto, a partnership is its owners, and so there's not transfer of weath. Of course, unlike a corporation, the owners of a partnership are personally liable for the partnership's debts.

Than what's the point? No transfer of wealth?

Eliminating the tax on dividends, temporarily, is a good thing IMO. It will encourgage ppl to put money back into the economy with the hope of a tax free reward... kind of like bonds, only the bond yield is so low no will but it. This way I can buy stocks that are yielding at 4-5% with all the implication of the bonds... Of course I need to use taxable income to get it. Short term Roths...

I geuss Zkibbler I don't understand what you are saying... Is this a bad thing or a good thing? Why would your solutions benefit the economy more? Why would a partnership over an investor be better? Too many cooks spoil the pot...

	19-05-2003 22:28									#13
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"What Bush's new tax plan wants to do is to make the transfer of wealth from the corporate person to its shareholders a tax-free transfer."

No, what it does is eliminate the fiction that a corporate profits and shareholders dividends are two separate items when, in fact, they are not.

	19-05-2003 22:36									#14
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Anyway, the tax on dividends is moot for Urban Ranger Enterprises as UR, in an attempt to escape the dividend tax, elects to pay himself a $195,000 bonus at the end of the year, thereby showing corporate profits of only $5,000. This will allow the $195,000 to be taxed only at his personal income tax rate, saving a huge chunk in dividend-related income taxes. While he actually pays a bit more to the government in income taxes (about $9,000, bringing the tax bill to $70k) than the corporation, he will not get hit with an additional dividend tax of around $45,000. Essentially, by my back of the envelope calculations, UR has the option of:

1. Paying out the pre-tax profit as a bonus, suffering a tax hit of $70,000.

or

2. Paying taxes on the profits, then paying out the after-tax profits as a dividend to himself (paying more taxes on that money) thereby suffering a total tax bite of $107,000.

The choice is so easy, even a could figure it out. Enjoy your $37,000 windfall!

Last edited by JohnT on 19-05-2003 at 22:42

	19-05-2003 22:39									#15
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He could also employ his family or dependents, pay for medical insurance, car insurance, other "requirements" for his buisness/life prior to issuing that bonus... Work from home and it gets even better...

	19-05-2003 22:41									#16
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Oh yeah, he could do lots of things. Have the company pay for the country club dues, drive a corporate car, etc.

	19-05-2003 22:49									#17
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one day I will incorporate, it will be kewl. My dad is inc. and he is but a dentist. I just need my own buisness... Working on that though.

	20-05-2003 00:48									#18
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It is extremely difficult, and almost impossible, IMO, to effectively gauge how much a corporations or corporations in general pay in taxes. There are so many loopholes and slippery accounting practices that one can only make a best guess.

	20-05-2003 00:50									#19
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Or one can look at their balance sheets... I'm not saying they're right, but that is what they pay.

	20-05-2003 00:51									#20
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Just because you don't understand it doesn't mean it can't be done, Sava. For example, Sten seemed to have a pretty good idea as to how to get a rough estimate of the taxes Exxon-Mobile paid last FY... and that was in your thread, iirc.

	20-05-2003 00:51									#21
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I'm just saying it isn't as simple as looking at the tax reports of an individual. If I were to guess... proportionally, I think corporations pay less in taxes than the rest of America.

	20-05-2003 00:53									#22
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quote: Originally posted by JohnT Just because you don't understand it doesn't mean it can't be done, Sava. For example, Sten seemed to have a pretty good idea as to how to get a rough estimate of the taxes Exxon-Mobile paid last FY... and that was in your thread, iirc.

I'm not saying it can't... you should read my posts better rather than base your responses on things I didn't say. I said it was very difficult do to the complex nature of how corporations are organized. That's why its harder to convict corporate criminals.

	20-05-2003 02:26									#23
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quote: Originally posted by Urban Ranger Thanks much. One more quick question, has the tax rate been changed in the recent years, some time in the 1990's?

AFAIK, the last time US corporate income tax rates were changed was with the 1986 tax law, the third major one during the Reagan administration.

What is normally changed is not marginal rates or brackets (too politically sensitive either direction), but technical changes such as depreciation rates and asset classes, alternative-minimum-tax thresholds and calculations, and stuff like that.

The People's Republic of California has a flat 9.6 percent tax on corporate profits, with a minimum tax if you lose money, but the PRC (ours, not yours ) extends that tax to all corporate operations worldwide, not just in California. So what people do is form separate entities for doing business in California, and the rest of the world. Nevada has no corporate income tax, and no personal income tax either - it's the only state with neither tax, although several other states also have no personal income taxes. AFAIK, Nevada is the only state with no corporate income tax.

	20-05-2003 02:30									#24
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quote: Originally posted by Sava I'm just saying it isn't as simple as looking at the tax reports of an individual. If I were to guess... proportionally, I think corporations pay less in taxes than the rest of America.

Two things you have to remember - one is individuals don't generally lose money, so they're taxed on positive income, while corporations can lose money, and only recover some of previous or future year's tax payments.

The other is that most corporations really can't benefit from multi-tier or multi-unit fun and games, or offshore charters, etc. Only a small percentage will be in a position where those sorts of fun and games are beneficial.

	20-05-2003 04:13									#25
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All corporate and business taxes should be eliminated. People should pay a tax on their personal income (I'd eliminate that too ). When a corporation has to pay a tax, it just passes the cost off on the consumers, so we end up paying their taxes anyway. If we had a national sales tax, then ALL products regardless of origin would be taxed at the same rate. Right now, if we tax a US business and a foreign competitor is exempt from the tax, we are giving the foreign business an advantage.

	20-05-2003 04:14									#26
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Corporate/business taxes should be eliminated, the consumers just end up paying them anyways.

	20-05-2003 05:59									#27
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One of the Channel Islands Near Jersey doesnt have Tax.
As a result many many UK companies hire a resident to be a director for the company so they can claim to be based there and not qualify for certain UK Mainland taxes.
Cheers
Matt

	20-05-2003 08:52									#28
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quote: Originally posted by MichaeltheGreat AFAIK, the last time US corporate income tax rates were changed was with the 1986 tax law, the third major one during the Reagan administration.

Thanks.