Dan, I’m not sure you undestand the meaning of the chart. What it shows is that the nearly 30 year long high rate of corporate income tax collections was devatated by the recession. Under Bush it appears corporate income tax collections went up by ~250%. As far as I can remember Obama’s corporate tax cuts have been minimal or the latest too soon to see in this chart.
So the chart shows revenue changes mostly due to the recession(s).
A significant part of the shift may be the increase in S-corps and LLCs, in which case the taxes are paid through the owners’ personal income tax returns.
And it is not surprising to see a drop off during the great recession.
Prior to 1982 the corporate tax was much lower than the higher personal income tax rates. This caused profitable small businesses (doctors/lawyers etc.) to file as corporations. After 1982 the tax rates were equalized, and there was no longer an incentive to file as a corporation.
The advent of the LLC and S Corp has also moved “corporate” taxes to “individual” tax returns.
AS, Dan was talking to fixing the deficit. The last time we had a balanced budget was 2000/01; therefore, I concentrated upon the chart since that time frame. The big dip in revenue/GDP percentage is recent and well within memory. The chart in that instance shows just how devastating the recession has been to corporate profits. They and the GDP have both been diminished, but the charts clearly shows which has been greater hit.
Unless you have a different analysis, all you are doing is a typical hit and run attack on the message.
My first impression is that there was a dramatic change from decreasing to increasing at about the same time Reaganomics started taking hold. It also became more recession dependent at that time.
Can someone explain this? Sammy has hit on it, but having less incentive to file as a corporation would not seem consistant with an uptick in the trend.
I believe that a Shares of Federal Government Receipts chart may serve as a better reference for purposes of this discussion. See the third chart from this BEA chart reference pack.
For business and corporate revenue numbers, note this three page summary of Government Receipts and Expenditures, Third Quarter of 2010; Table 3.22 in this BEA reference; and the Internal Revenue Gross Collections by Type of Tax & Fiscal Year available here.
Actually you wound want to look at schedule c income Schedule E income from non investment partnerships as well as partnership k-1 income. A combination of those 3 would show the income. 1040 ES is estimated income which would likley include the above plus capital gains and 1099 from contract work.
Lets pose an issue if we removed the number of stockholder limitations on chapter S corps, would most corps go that way? Given that the total tax rate for a shareholder would be less, and they would pay taxes on earnings that were retained or used in buy backs (basically take profits after depreciation and the like and pay at that rate with a pro rata share. Today another reason small companies may not want to go public is being forced off chapter S status, and having to directly pay a tax as well as the shareholder paying a tax.
This thread is a perfect example of why I keep saying that the focus on the numerical minutia will only hide the macro-economic results of all the machinations. Comments are analysing a single chart and insisting that the “results” show this or the opposite. Then its little more than an argument replicating a “he said, she said” scenario. Look at the end product. The wealthiest Americans continue to garner a greater and greater share of the income and wealth of the economy. How much is owned by the top One Percent Club? The rest of the argument is bull shit?
I linked to a different chart which actually compares the business/corporate share of tax revenues to other sources for Federal revenue. Further, I identified three sources for historical and 2010 revenue figures.
Apparently, you didn’t bother to check out any of the links. Your claim that everyone was only analyzing a single chart is false.
A few weeks ago Tim Geithner proposed just the opposite – every business would be taxed as a C-Corp no matter what the format.
Other than being a giant windfall for CPAs to restructure hundreds of thousands of entities, it is a really radical idea. No wonder he couldn’t do his own tax return.
The issue remains corporate taxes as a percenatge continue to fall. Individual taxes are falling also; but I do not see the same decrease. Hourly Wage Withholding taxes appear to be taking up the slack.
“The issue remains corporate taxes as a percenatge continue to fall.”
business/corporate tax revenues as a share of Federal revenues are up not down.
Moreover, from 2002 to 2007 business/corporate tax revenues share rose steadily until the recession hit. Now, of course, such tax revenues are again rising as a share of Federal revenues.
“The issue remains corporate taxes as a percenatge continue to fall.”
Business/corporate tax revenues as a share of Federal revenues are up not down.
Moreover, from 2002 to 2007 business/corporate tax revenues share rose steadily until the recession hit. Now, of course, such tax revenues are again rising as a share of Federal revenues.
It appears the trend is downward in the long term. Even the charts you cite show such a downward trend and also supports each of my my contentions. I suspect an improving economy contributed to such; but, it really doesn’t matter when the deficts grew well beyond whatever tax revenue was generated by a lackluster jobless economy. Defense and Security, and the tax cuts contributed 90% to the ~$7 trillion defict experienced now. Change the tax rate and the deficit will disappear. http://www.cbpp.org/cms/?fa=view&id=640
Business/corporate Federal taxation as a percentage of GDP declined below 2% in 1982 and remained below 2% of GDP until 1994. Business/corporate Federal taxation remained above 2% from 1994 to 2000. The taxation as a percentage of GDP remained below 2% until 2005 when the percentage again turned upward providing 2.2% in 2005, 2.7% in 2006, 2.7% in 2007, and 2.1% in 2008. The business/corporate Federal taxation levels as a percentage of GDP achieved in 2006 and 2007 exceeded any GDP percentage on record since 1977, and exceeded all GDP percentages of 1994-2000 by a minimum of .5% of GDP.
The latest recession drove down business/corporate Federal taxation as a percentage of GDP to 1.0% in 2009 and 1.3% in 2010. U.S. Government analysis is projecting a return to GDP percentages above 2% in 2012 and beyond. Specifically, the percentage of GDP projections are 1.3% in 2011, 2.1% in 2012, 2.4% in 2013, 2.5% in 2014, 2.4% in 2015, and 2.4% in 2016.
There is no downward trend for business/corporate taxation as a percentage of GDP indicated for the future based on current Federal law.
Individual income taxes as a percentage of GDP are not predicted to return to the 2008 level of 8.0% until 2013 and the 2007 level of 8.4% or higher in 2014.
Federal withholding taxation as a percentage of GDP held at 6.6% from 1994-2000, increased to 6.8% in 2001, and declined to 6.3% from 2006 through 2009. The level fell to 6.0% in 2010. The projections are 5.4% in 2011, 5.9% in 2012, 6.1% in 2013, and 6.2% in 2014-2016. —–
Business/corporate Federal taxation as a source share of Federal revenues reached 12.9% in 2005, a level not seen since 1979. The business/corporate source share rose to 14.7% in 2006 and 14.4% in 2007, levels not reached since 1978. The percentage source share declined to 12.1% in 2008, 6.6% in 2009, 8.9% in 2010 with projections of 9.1% in 2011, 12.5% in 2012, 13.5% in 2013, 13.2% in 2014, 12.7% in 2015, and 12.2% in 2016.
Individual income taxes as a source share of Federal revenues slipped 1.9% to 43.5% in 2009, and lost another 2% in 2010 falling to 41.5%. Projections anticipate a strong rebound to 44% in 2011 with further growth through 2016 at 46.8%, a level slightly higher than the 46.3% achieved in 2002.
Federal withholding taxation as a source share of Federal revenues reached an all time high of 40% in 2003, declining annually thereafter until 2008 when the level rose to 35.7%. The level spiked to 42.3% in 2009, and declined to 40% in 2010. The projected levels decline each year after 2010, falling to 32.3% in 2016. But most Federal withholding taxation revenues are program dedicated and are not readily available to the General Fund unless cashflow surpluses exist.
“Defense and Security, and the tax cuts contributed 90% to the ~$7 trillion defict experienced now. Change the tax rate and the deficit will disappear.”
What level of tax rate increases are you basing your claim on? Where is your supporting math?
Restoration of Federal revenue from all Bush II era tax cuts would improve the General Fund revenues balance, but such additional revenue would not eliminate any of the OMB projected fiscal year budget deficits for 2011-2020 norreduce any portion of the existing Gross Federal Debt or Debt Held by the Public.
The FY2011 Federal Budget deficit is projected by OMB to be $1.645 trillion.
Gross Federal Debt as of March 10, 2011 is $14.16 trillion, of which $9.55 trillion is Debt Held by the Public and $4.61 trillion in Intragovernmental Holdings.
Dan, I’m not sure you undestand the meaning of the chart. What it shows is that the nearly 30 year long high rate of corporate income tax collections was devatated by the recession. Under Bush it appears corporate income tax collections went up by ~250%. As far as I can remember Obama’s corporate tax cuts have been minimal or the latest too soon to see in this chart.
So the chart shows revenue changes mostly due to the recession(s).
If you don’t have the data argue the analysis. If you have neither attack the messenger.
A significant part of the shift may be the increase in S-corps and LLCs, in which case the taxes are paid through the owners’ personal income tax returns.
And it is not surprising to see a drop off during the great recession.
Taking a straight edge and line thru the tops between recessions and you see a line declining from the 1950’s toward this date.
Don’t press too hard on you display!
GDP is larger now than in ’53, so we talk %. Federal gumint is also larger % of GDP than in 53.
Prior to 1982 the corporate tax was much lower than the higher personal income tax rates. This caused profitable small businesses (doctors/lawyers etc.) to file as corporations. After 1982 the tax rates were equalized, and there was no longer an incentive to file as a corporation.
The advent of the LLC and S Corp has also moved “corporate” taxes to “individual” tax returns.
AS, Dan was talking to fixing the deficit. The last time we had a balanced budget was 2000/01; therefore, I concentrated upon the chart since that time frame. The big dip in revenue/GDP percentage is recent and well within memory. The chart in that instance shows just how devastating the recession has been to corporate profits. They and the GDP have both been diminished, but the charts clearly shows which has been greater hit.
Unless you have a different analysis, all you are doing is a typical hit and run attack on the message.
Do you and rusty know that 1040 ES income is not included in corporate?
Just wondering, it can be easily separated for reporting.
My first impression is that there was a dramatic change from decreasing to increasing at about the same time Reaganomics started taking hold. It also became more recession dependent at that time.
Can someone explain this? Sammy has hit on it, but having less incentive to file as a corporation would not seem consistant with an uptick in the trend.
Found over at Money Illusion:
“Its no coincidence that corporate profits as a percentage of GDP are back to their all time highs whilst average wages and employment languish.”
In comments.
They were bashing Krugman for not reading them……..
Jon Stewart moment.
What is “1040 ES income.” Proprietorship? Independent Contractor? Not a phrase us tax geeks use.
I believe that a Shares of Federal Government Receipts chart may serve as a better reference for purposes of this discussion. See the third chart from this BEA chart reference pack.
For business and corporate revenue numbers, note this three page summary of Government Receipts and Expenditures, Third Quarter of 2010; Table 3.22 in this BEA reference; and the Internal Revenue Gross Collections by Type of Tax & Fiscal Year available here.
I wonder how this chart would compare to one showing the change in corporate lobbying and politcal contributions over the same period.
I guess looking at it another way they might be supporting government wholesale rather than paying taxes (with the retail markup heh)
Actually you wound want to look at schedule c income Schedule E income from non investment partnerships as well as partnership k-1 income. A combination of those 3 would show the income.
1040 ES is estimated income which would likley include the above plus capital gains and 1099 from contract work.
Lets pose an issue if we removed the number of stockholder limitations on chapter S corps, would most corps go that way? Given that the total tax rate for a shareholder would be less, and they would pay taxes on earnings that were retained or used in buy backs (basically take profits after depreciation and the like and pay at that rate with a pro rata share. Today another reason small companies may not want to go public is being forced off chapter S status, and having to directly pay a tax as well as the shareholder paying a tax.
Rusty:
And a shifting of profits to low cost countries.
This thread is a perfect example of why I keep saying that the focus on the numerical minutia will only hide the macro-economic results of all the machinations. Comments are analysing a single chart and insisting that the “results” show this or the opposite. Then its little more than an argument replicating a “he said, she said” scenario. Look at the end product. The wealthiest Americans continue to garner a greater and greater share of the income and wealth of the economy. How much is owned by the top One Percent Club? The rest of the argument is bull shit?
Jack, your reading skills are a little weak.
I linked to a different chart which actually compares the business/corporate share of tax revenues to other sources for Federal revenue. Further, I identified three sources for historical and 2010 revenue figures.
Apparently, you didn’t bother to check out any of the links. Your claim that everyone was only analyzing a single chart is false.
Actually a 1040 ES is not income but an quarterly estimated tac form for individuals.
Yep
A few weeks ago Tim Geithner proposed just the opposite – every business would be taxed as a C-Corp no matter what the format.
Other than being a giant windfall for CPAs to restructure hundreds of thousands of entities, it is a really radical idea. No wonder he couldn’t do his own tax return.
Jack:
agreed . . .
The issue remains corporate taxes as a percenatge continue to fall. Individual taxes are falling also; but I do not see the same decrease. Hourly Wage Withholding taxes appear to be taking up the slack.
Dan’s chart is showing a longer term trend.
“The issue remains corporate taxes as a percenatge continue to fall.”
business/corporate tax revenues as a share of Federal revenues are up not down.
Moreover, from 2002 to 2007 business/corporate tax revenues share rose steadily until the recession hit. Now, of course, such tax revenues are again rising as a share of Federal revenues.
“The issue remains corporate taxes as a percenatge continue to fall.”
Business/corporate tax revenues as a share of Federal revenues are up not down.
Moreover, from 2002 to 2007 business/corporate tax revenues share rose steadily until the recession hit. Now, of course, such tax revenues are again rising as a share of Federal revenues.
MG:
It appears the trend is downward in the long term. Even the charts you cite show such a downward trend and also supports each of my my contentions. I suspect an improving economy contributed to such; but, it really doesn’t matter when the deficts grew well beyond whatever tax revenue was generated by a lackluster jobless economy. Defense and Security, and the tax cuts contributed 90% to the ~$7 trillion defict experienced now. Change the tax rate and the deficit will disappear. http://www.cbpp.org/cms/?fa=view&id=640
Business/corporate Federal taxation as a percentage of GDP declined below 2% in 1982 and remained below 2% of GDP until 1994. Business/corporate Federal taxation remained above 2% from 1994 to 2000. The taxation as a percentage of GDP remained below 2% until 2005 when the percentage again turned upward providing 2.2% in 2005, 2.7% in 2006, 2.7% in 2007, and 2.1% in 2008. The business/corporate Federal taxation levels as a percentage of GDP achieved in 2006 and 2007 exceeded any GDP percentage on record since 1977, and exceeded all GDP percentages of 1994-2000 by a minimum of .5% of GDP.
The latest recession drove down business/corporate Federal taxation as a percentage of GDP to 1.0% in 2009 and 1.3% in 2010. U.S. Government analysis is projecting a return to GDP percentages above 2% in 2012 and beyond. Specifically, the percentage of GDP projections are 1.3% in 2011, 2.1% in 2012, 2.4% in 2013, 2.5% in 2014, 2.4% in 2015, and 2.4% in 2016.
There is no downward trend for business/corporate taxation as a percentage of GDP indicated for the future based on current Federal law.
Individual income taxes as a percentage of GDP are not predicted to return to the 2008 level of 8.0% until 2013 and the 2007 level of 8.4% or higher in 2014.
Federal withholding taxation as a percentage of GDP held at 6.6% from 1994-2000, increased to 6.8% in 2001, and declined to 6.3% from 2006 through 2009. The level fell to 6.0% in 2010. The projections are 5.4% in 2011, 5.9% in 2012, 6.1% in 2013, and 6.2% in 2014-2016.
—–
Business/corporate Federal taxation as a source share of Federal revenues reached 12.9% in 2005, a level not seen since 1979. The business/corporate source share rose to 14.7% in 2006 and 14.4% in 2007, levels not reached since 1978. The percentage source share declined to 12.1% in 2008, 6.6% in 2009, 8.9% in 2010 with projections of 9.1% in 2011, 12.5% in 2012, 13.5% in 2013, 13.2% in 2014, 12.7% in 2015, and 12.2% in 2016.
Individual income taxes as a source share of Federal revenues slipped 1.9% to 43.5% in 2009, and lost another 2% in 2010 falling to 41.5%. Projections anticipate a strong rebound to 44% in 2011 with further growth through 2016 at 46.8%, a level slightly higher than the 46.3% achieved in 2002.
Federal withholding taxation as a source share of Federal revenues reached an all time high of 40% in 2003, declining annually thereafter until 2008 when the level rose to 35.7%. The level spiked to 42.3% in 2009, and declined to 40% in 2010. The projected levels decline each year after 2010, falling to 32.3% in 2016. But most Federal withholding taxation revenues are program dedicated and are not readily available to the General Fund unless cashflow surpluses exist.
Sources: OMB1, OMB2, OMB3
“Defense and Security, and the tax cuts contributed 90% to the ~$7 trillion defict experienced now. Change the tax rate and the deficit will disappear.”
What level of tax rate increases are you basing your claim on? Where is your supporting math?
Restoration of Federal revenue from all Bush II era tax cuts would improve the General Fund revenues balance, but such additional revenue would not eliminate any of the OMB projected fiscal year budget deficits for 2011-2020 nor reduce any portion of the existing Gross Federal Debt or Debt Held by the Public.
The FY2011 Federal Budget deficit is projected by OMB to be $1.645 trillion.
Gross Federal Debt as of March 10, 2011 is $14.16 trillion, of which $9.55 trillion is Debt Held by the Public and $4.61 trillion in Intragovernmental Holdings.
Sources: OMB, Treasury1, TPC, Treasury2