Corporate Tax, Small Business, Etc.

[Alan®]

I began thinking about Joecoolfreaks post and decided to finally help draw a picture for everyone since no one seems to get it.

Source: AP

That means, regardless of what you do to the corporate tax code, two thirds of them aren't even paying ANY corporate taxes.

Do you know notice what word seems to be missing from your post that would actually have relevance? LARGE. Figures that the study would be launched by the Democrats

Let me break it down for you statistically.

There are currently 25,409,525 business operating inside of the U.S. Of those 25.4 million, 19,523,741 are considered non employer firms because they have no payroll. That is roughly 77% of all business operating inside the country. But and I quote....

Source:http://www.census.gov/epcd/www/smallbus.html

Account for only about 3.4 percent of business receipts

I wonder why they aren't paying any business tax . Think about it 77% of business operating in this country are people with no payroll (I.E. Self-employed) yet only account for 3.4% of reciepts. Translation they aren't making that much money. With that said would you rather pay personal income tax or pay 39.2% corporate tax+State Tax+Health Care and then finally pay yourself with whatever's left over.

Additionaly by size definition a Small Business (depending on sector)has no more than 1,500 on average though it's about 750~

Source:http://www.sba.gov/idc/groups/public...d_tablepdf.pdf

Go back to the Census Bureau. If you include all those with no payroll. Small Business accounts for (if you go to 1500) account for 99% of Business in the market place. Do the math yourself if you don't believe me because I checked it 3 times.

If you really think that doing nothing to the corporate tax rate will have virtually no effect on this ecconomy plase get yourself a clue.

[joecoolfreak]

Now I am impressed. That was a very well researched post and I did look at your information very carefully. Let's see what I came up with:

Your source to the census page provided this one:

Because nonemployers account for only about 3.4 percent of business receipts, they are not included in most business statistics, for example, most reports from the Economic Census.

So what does this mean in regards to my original point. I shall clarify now. Two thirds of businesses that employ more than one person do not pay corporate taxes. The point you quoted me on refers only to the employer business and do not take into account all of the self employed people. We can ascertain from your post that the businesses that do employ people are the ones making most of the money, yet are also not paying any corporate taxes. I still don't understand at all how this invalidates my conclusion that the corporate taxes don't affect 2/3 of the businesses that are actually making money and supposed to be paying taxes.

Let's keep going shall we? I am really not sure how you got your math so I will explain how I did mine and you can tell me how you differed. I added the amount of receipts from table 2b for Firms with 2,500 employees or more with the amount of receipts for Firms with 1,500 to 2,499 employees and you get a total for receipts of 11,890,208,735. We know the total number of receipts for all business is 22,832,560,524 so by my math large businesses account for 53% of all business in the marketplace. I can't imagine that you came up with 99% for small business. And this is also going by your assumption of anything less than 1500 employees is considered small business. If we assume anything less than 750 is small, then small business only makes up 44% of all business, but still nowhere even close to your number of 99%

Now that the math is correct, it still doesn't invalidate the original point that you were trying to prove incorrect. 2/3 of all businesses with at least 2 employees don't pay ANY corporate taxes and this includes small and large business.

[Alan®]

It's going to take me a moment to go back thorugh all this again so give me sometime. Got your PM.

[joecoolfreak]

Please take all the time you need. I will be back later at least once more tonight to see your response.

[Alan®]

Because nonemployers account for only about 3.4 percent of business receipts, they are not included in most business statistics, for example, most reports from the Economic Census.

So what does this mean in regards to my original point. I shall clarify now. Two thirds of businesses that employ more than one person do not pay corporate taxes.

Aaaah but unfortunately your article from the AP does not distinguish between the two it simply says corporations

Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.

The point you quoted me on refers only to the employer business and do not take into account all of the self employed people.

Not that this is your fault or mine but because of the incredible vagueness that is most AP articles I am going to assume that it means ALL corporations considering the article said

The GAO study did not investigate why corporations weren't paying federal income taxes or corporate taxes and it did not identify any corporations by name

and it also said

increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.

I highly doubt any major corporation would try and do this and any small business with at least one employee would be foolish to do so hence, why I took into account those that are self employed hence, still making my point valid

We can ascertain from your post that the businesses that do employ people are the ones making most of the money, yet are also not paying any corporate taxes.

Your going to have to show me how you came up with that considering the artilce clearly states.

About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations

So you've got 75% of missing corporate tax funds that aren't accounted for again since 77% of the business in this country are non-employer, I'd be willing to bet that the majority of that missing 75% falls under them.

About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations

I still don't understand at all how this invalidates my conclusion that the corporate taxes don't affect 2/3 of the businesses that are actually making money and supposed to be paying taxes.

The article in it of itself proves that it does in fact when.

increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.

Think about it, we are in an economic crisis so what is every business trying to do right now? SAVE MONEY. Again depending on how much the company is bringing in, they save themselves money by just claiming all the money made through the business as personal income. Like I said 39.2% Corporate tax+State tax+health care=very small income once all is said and done.

Let's keep going shall we? I am really not sure how you got your math so I will explain how I did mine and you can tell me how you differed. I added the amount of receipts from table 2b for Firms with 2,500 employees or more with the amount of receipts for Firms with 1,500 to 2,499 employees and you get a total for receipts of 11,890,208,735. We know the total number of receipts for all business is 22,832,560,524 so by my math large businesses account for 53% of all business in the marketplace. I can't imagine that you came up with 99% for small business. And this is also going by your assumption of anything less than 1500 employees is considered small business. If we assume anything less than 750 is small, then small business only makes up 44% of all business, but still nowhere even close to your number of 99%

Now that the math is correct, it still doesn't invalidate the original point that you were trying to prove incorrect. 2/3 of all businesses with at least 2 employees don't pay ANY corporate taxes and this includes small and large business.

To be honest I hadn't gotten into the receipts so you will have to give me sometime to go through them

[joecoolfreak]

Aaaah but unfortunately your article from the AP does not distinguish between the two it simply says corporations

Yes, it says corporations

Most are self-employed persons operating unincorporated businesses

In other words, the self-employed stats are mostly unincorporated, ie...not corporations at all

Not that this is your fault or mine but because of the incredible vagueness that is most AP articles I am going to assume that it means ALL corporations considering the article said

I agree is it certainly more vague than it should be, yet corporations are not the same as businesses. To be a corporation, you have to incorporate which we can see from the first quote, those self-employed people didn't.

I highly doubt any major corporation would try and do this and any small business with at least one employee would be foolish to do so hence, why I took into account those that are self employed hence, still making my point valid

I agree that no major corporation would, but I do believe that a lot of smaller businesses with employees would do this. I know of several that do. Is it right, no, but that's part of the problem I outlined to start out with. There are a lot of businesses skirting the tax code.

Your going to have to show me how you came up with that considering the artilce clearly states. So you've got 75% of missing corporate tax funds that aren't accounted for again since 77% of the business in this country are non-employer, I'd be willing to bet that the majority of that missing 75% falls under them.

I am stating the exact quote from the article in AP which was vague to be sure, yet non the less credible. Another quote from the AP article will help me out here:

About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.

That means at least 25 of the 2/3 that I am claiming are not paying corporate taxes like they should ARE large business and certainly can't be part of the self-employed because they have at least 1500 employees to be considered large. Now of course, that article defined large by assets and reciepts, but I think we can assume that if you have 250million in assets or 50 million in sales, you aren't self employed. To simplify the math here:

Lets say that there are 100 business in the US. By my claims, 2/3 of them don't pay ANY corporate taxes. That means 66 of those businesses are likely to be cheating the system. Also 16.5 of those 66 are LARGE business and they definitely aren't part of the self employed statistics.

Now you quoted:

increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.

These again are corporations and as I have already clearly shown, the self employed are unincorporated, so again don't fall in here.

Think about it, we are in an economic crisis so what is every business trying to do right now? SAVE MONEY. Again depending on how much the company is bringing in, they save themselves money by just claiming all the money made through the business as personal income. Like I said 39.2% Corporate tax+State tax+health care=very small income once all is said and done.

I completely agree that these businesses are trying to "cheat" the system to pay lower taxes which is just another reason why I support Obama's plan to raise the taxes on those that are trying to get out of the system that everyone else has to pay.

To be honest I hadn't gotten into the receipts so you will have to give me sometime to go through them

As I said, take all the time you need. I will be back tomorrow for more discussion.

[Alan®]

There is entirely too much fuccing math involved in this thread

[Alan®]

Hey Joe. I'm slowly starting to pick through your post. Can't sleep, not tired, yet can't seem to focus on anything so this is taking me longer than it should

Let's keep going shall we? I am really not sure how you got your math so I will explain how I did mine and you can tell me how you differed. I added the amount of receipts from table 2b for Firms with 2,500 employees or more with the amount of receipts for Firms with 1,500 to 2,499 employees and you get a total for receipts of 11,890,208,735. We know the total number of receipts for all business is 22,832,560,524 so by my math large businesses account for 53% of all business in the marketplace. I can't imagine that you came up with 99% for small business.

Aaah I see how you're math and my math are different.

When I calculated small business I didn't go through reciepts I went through firm's to show the actual number of small business both nonemployer and employer.I won't write out the entire problem but I will say that I made one stupid mistake in my math REPEATEDLY and it took forever.LOL. Either way when you look at what I did based on the actual number of firms small business does in fact account for 99% of businesses in existence that are domestic.

And this is also going by your assumption of anything less than 1500 employees is considered small business. If we assume anything less than 750 is small, then small business only makes up 44% of all business, but still nowhere even close to your number of 99%

Again see above.

[Alan®]

Ok going back to the whole issue of reciepts etc. based on my interpretatoin of the term provided by good ole Uncle Sam, it's basically just a way of calculating revenue.

So basically based on the companies with employees that results in a total of $22,062,528,196,000. Now if you take the number of receipts based on the number of small business(I'm still going to the limit here of 1,500)then small business account for roughly 46% of all receipts or $10,172,319,461,000. That's roughly half.

Think about that. Half of the receipts generated are generated by small business owners who create jobs HERE in this country who account for(even under JUST employer businesses)98% of businesses operating here. And yet we are supposed to raise their taxes?

It simply doesn't surprise me that when they can they convert everything to personal tax because it's cheaper.

[joecoolfreak]

Hey Joe. I'm slowly starting to pick through your post. Can't sleep, not tired, yet can't seem to focus on anything so this is taking me longer than it should

Aaah I see how you're math and my math are different.

When I calculated small business I didn't go through reciepts I went through firm's to show the actual number of small business both nonemployer and employer.I won't write out the entire problem but I will say that I made one stupid mistake in my math REPEATEDLY and it took forever.LOL. Either way when you look at what I did based on the actual number of firms small business does in fact account for 99% of businesses in existence that are domestic.


Again see above.

Ok, I see where you are going with this. You math is correct, but it's way off in supporting your conclusion. What you are saying is that if you add up the total number of small businesses and then see what percentage that is of all businesses, you are getting 99%. The problem with that is it is a meaningless determination.

Let's say we have 5 total businesses: McDonald's, Jane's Fast Food, Bob's Fast Food, Randy's Fast Food, and Sara's Fast Food. Each of the Personal fast food restaurants has one store. McDonald's have 5000 stores. By your math, then out of all 5 businesses, 4 are small business, so therefore 80 percent of all business is small business. That's just silly. Of course there are less large businesses than small businesses in physical quantity, but that's because the larger the business, the more entities that it encompasses.

Now, what started all of this conclusion was:

Go back to the Census Bureau. If you include all those with no payroll. Small Business accounts for (if you go to 1500) account for 99% of Business in the market place. Do the math yourself if you don't believe me because I checked it 3 times.

Look at what you said here. You said that small businesss accounts for 99% off business(in other words...transactions). What you meant to say is that small business account for 99% of all businesses. This statement would have been accurate. The problem that still lies is that the statement still doesn't support the meaning you are trying to imply. Yes, there are more small business NAMES than large business NAMES, but the size of the business obviousily skews the numbers. That is why my math was completely seperate. Small businesses only account for 45% or so of the actual business done.

To bring it all back in to perspective I do agree that increasing taxes will affect businesses. Remember that taxes are based on transactions, not physical numbers in existance, so it's fair to say that small businesses will be affected by any corporate tax change. What all of this math still fails to do is invalidate the first point that I made, which is still that 2/3 of all corporations fail to pay ANY corporate taxes to begin with. That's just scary. I completely agree that if we don't change the tax code at all and just enforce that companies actually pay their taxes like they should currently, it would have an economic affect on their bottom line. The problem is that they aren't paying the taxes now and and absolutely should be. Taxes are a necessity to running the country. Without them, this would not be one of the greatest countries on earth. When lots and lots of people are skipping out on their responsibilities and it finally comes around to bite them, I don't feel bad at all. I don't feel bad that some employer with 5 employees is going to have to start paying corporate taxes because he has been taking the 700k in profit the company makes every year as an annual salary so he pays personal taxes instead of corporate. I am glad that tax bracket is being raised. Will he make less? Sure. Will he fire someone so that he can still pocket that that extra 120k? He might. It's not good business and he will make less money next year because of having less employees. Should he just eat the bullet and take home 580k and be happy with that? I think so. I don't think you should punish people for being successful. The problem is that no one in this country gets ahead in life without taking advantage of all of the benifits of our taxes. No one gets rich without being able to drive their car to work on a road paid by taxes. No one goes to a school that wasn't at least supplimented by governent assistance for education. Nobody eats food that hasn't been inspected by the fda. You get the point and when it comes time for people who have made it successfully to the top, they should be paying more taxes. Not necessarily because it's fair, but moreso because they are the only ones that can. You have made a great deal of emphisis trying to prove that whatever is done will affect 99% of businesses which is small business. Take that same logic and apply it to the personal tax base. Non-wealthy people(less than 600k/year) make up 99% of all tax payers. Obama wants to lower the taxes for that 99%. He only wants to raise the taxes for that last 1% of the wealthiest. Think about that and how it relates to your logic. Does that mean that Obama's personal tax changes won't have any real effects because it only raises taxes for 1% of the tax base? Does that mean that it will have enourmous economic benifits because it lowers taxes for 99% of the tax base? Think about it.

[Alan®]

Ok, I see where you are going with this. You math is correct, but it's way off in supporting your conclusion. What you are saying is that if you add up the total number of small businesses and then see what percentage that is of all businesses, you are getting 99%. The problem with that is it is a meaningless determination.

How is it a meaningless determination. The whole point of this is to show by putting any more taxes on corporations is going to hurt the little guy more than it is going to hurt the big corporations that 1% of all businesses operating inside of the U.S. And to show why hell even I if I could would simply roll it all into personal tax because no mater which way you slice it is . The problem here is that most people simply go oh companies are making too much money when they don't realize that small business owners make up almost all of the corporate world in the country.

Look at what you said here. You said that small businesss accounts for 99% off business(in other words...transactions). What you meant to say is that small business account for 99% of all businesses. This statement would have been accurate. The problem that still lies is that the statement still doesn't support the meaning you are trying to imply. Yes, there are more small business NAMES than large business NAMES, but the size of the business obviousily skews the numbers. That is why my math was completely seperate. Small businesses only account for 45% or so of the actual business done.

:facepalm: That is precisely what I meant. Stupid typo on my part. My math only varied 1% from yours so we are still in agreement but I still contend that even though they make up just under half any change they make will have a profound effect on small business before it really begins to hurt any of the big players like Wal-Mart, Microsoft,etc.

To bring it all back in to perspective I do agree that increasing taxes will affect businesses. Remember that taxes are based on transactions, not physical numbers in existance, so it's fair to say that small businesses will be affected by any corporate tax change. What all of this math still fails to do is invalidate the first point that I made, which is still that 2/3 of all corporations fail to pay ANY corporate taxes to begin with. That's just scary.

I wasn't intending to invalidate your point simply show why. Yea it's scary but to be honest I don't blame them. The corporate tax rate in this country is outrageous and I'm simply not surprised that most business simply do everything under the personal tax income.

Taxes are a necessity to running the country. Without them, this would not be one of the greatest countries on earth. When lots and lots of people are skipping out on their responsibilities and it finally comes around to bite them, I don't feel bad at all. I don't feel bad that some employer with 5 employees is going to have to start paying corporate taxes because he has been taking the 700k in profit the company makes every year as an annual salary so he pays personal taxes instead of corporate. I am glad that tax bracket is being raised. Will he make less? Sure. Will he fire someone so that he can still pocket that that extra 120k? He might. It's not good business and he will make less money next year because of having less employees. Should he just eat the bullet and take home 580k and be happy with that?I think so.

See but I don't think so. Think about it.If he has figured out how to pocket more money by going thorugh personal income tax instead of corporate that means he's got more money to spend, more money to invest, more money to expand the business. So what does that mean? It means basically more jobs. Although unemployment is low by historical standards people are up in arms at 6% and like you contended what do you think people will do when they hear unemployment hits 7 or 8% because of raising taxes? They will be livid. Something else to think about. As much as people would like to say "Oh well you know they are only doing it to pay less in taxes" and just leave the thought at that it's incomplete. If most small businesses were to pay the actual corporate tax rate they would not be able to keep as many people employed as they would otherwise need.

I'll get to the rest later.

[joecoolfreak]

How is it a meaningless determination. The whole point of this is to show by putting any more taxes on corporations is going to hurt the little guy more than it is going to hurt the big corporations that 1% of all businesses operating inside of the U.S. And to show why hell even I if I could would simply roll it all into personal tax because no mater which way you slice it is . The problem here is that most people simply go oh companies are making too much money when they don't realize that small business owners make up almost all of the corporate world in the country.

Because taxes are determined by receipts. As I showed before, even though small businesses make up 99% of businesses, they should only be taxed for 45% of the business being done in the US. The physical amount of each business being taxed is so spread out that it's relatively small amounts. Small business owners make up the vast majority of physical businesses, yet make up less than a majority of the money being taken in.

Again, this is why I find your point of view so puzzling. You are so inclined to give large earners(wealthy individuals) less taxes. (They already make up the bulk of the tax revenue, but then on the opposite side, you want to give small businesses a break even though the large businesses are the ones that should be receiving tax breaks and you should be taxing small businesses more by the same logic.

My whole point is not only should all individuals and corporations be paying more taxes, but it only makes sense from a financial perspective to raise the taxes on the ones that you will receive the most amount of money from. This is for two reasons, one because they are the only ones with money to spare and the smaller entities on both sides of the equation just can't afford to pay more, and two, because they are the ones that will provide the most amount of income to the tax base which is what we so desperately need.

Is it fair to tax the rich or large more than the small or poor? NO, but it's the only way things will work out in the long run. If we were to follow your same logic that we should be primarily capitalistic and fair, then we should tax small businesses less than large ones because they aren't as successful and being successful by your logic means that you should not be "punished" for that.

Do you see the connection between these two concepts(personal and corporate taxing)?


[quote=RedGT} :facepalm: That is precisely what I meant. Stupid typo on my part. My math only varied 1% from yours so we are still in agreement but I still contend that even though they make up just under half any change they make will have a profound effect on small business before it really begins to hurt any of the big players like Wal-Mart, Microsoft,etc.[/quote]

This is the exact reason why I support lowering taxes for the lower income individuals and raising them for the upper 1%. I really don't see how you can't apply the same logic that you are here for corporate taxes and you do for the concepts I lay out in my personal tax thread.

I wasn't intending to invalidate your point simply show why. Yea it's scary but to be honest I don't blame them. The corporate tax rate in this country is outrageous and I'm simply not surprised that most business simply do everything under the personal tax income.

We are starting to see eye to eye now. I do understand why they do it, but that doesn't make it right. I don't have a problem with the highest corporate tax rate as it goes to pay the country with the highest infrastructure costs. Such is the price to pay to be successful in America.

See but I don't think so. Think about it.If he has figured out how to pocket more money by going thorugh personal income tax instead of corporate that means he's got more money to spend, more money to invest, more money to expand the business. So what does that mean? It means basically more jobs. Although unemployment is low by historical standards people are up in arms at 6% and like you contended what do you think people will do when they hear unemployment hits 7 or 8% because of raising taxes? They will be livid. Something else to think about. As much as people would like to say "Oh well you know they are only doing it to pay less in taxes" and just leave the thought at that it's incomplete. If most small businesses were to pay the actual corporate tax rate they would not be able to keep as many people employed as they would otherwise need.

I'll get to the rest later.

I think this concept is just plain optomistic and utopian. It would be great if we gave businesses less tax burden and they therefore invested more and hired more, but that just isn't the reality. If we give this guy more money, and don't force him to pay more taxes on that profit, he is just going to pocket more of the money. Don't forget the the more he spends, the more sales tax and other things are going to get him, so it just doesn't work out in reality.

[joecoolfreak]

Several good quotes from here:

He claims 23 million small-business owners would pay higher tax rates under Obama. He's wrong. The vast majority would see no change, and many would get a cut.

In response to the numbers we have discussed earlier:

That in itself is seriously misleading. If McCain wants to focus on the effects of Obama's plan on employment, he would do better to confine his count to employers – the just under 6 million firms that actually have workers. And even that figure wouldn't be applicable because Obama's tax increase wouldn't fall on all employers, only on those in the top two income tax brackets.

As for actual income tax rates, which is what McCain keeps talking about, Rogers says "if they make over $250,000 and file as individuals ... their taxes go up." But this leaves out all but a very small fraction of those McCain counts as small-business owners. Rogers also says taxes will go up if small-business owners "have capital gains or dividends," but Obama's proposal would not increase rates on capital gains or dividends for couples making under $250,000, or singles making under about $200,000, regardless of whether they are classified as small-business owners or not.

So will some small business owners see more taxes?

It is also not clear how many who report business income actually employ any workers. In 2004, the Tax Policy Center found that hundreds of thousands of individual taxpayers who had business income from partnerships or subchapter-S corporations (whose owners pay taxes as individuals) did not claim any tax deductions for employee expenses. For all these reasons we judge that the actual number of small-business employers who would face higher tax rates under Obama is probably far below 663,608, and certainly a far cry from McCain's ridiculously inflated 23 million figure.

But... =-)

While Obama's plan would raise rates at the top, it also would grant what he calls a “Making Work Pay” tax credit of up to $500 per person, or $1,000 per working family. Since this credit would not begin to phase down for couples making less than $150,000, we judge it likely that many, if not most of the 23 million that McCain counts as "small-business owners" would likely get tax reductions.

That means that although a number of "small businesses" will see more taxes, MOST will see less.

[Alan®]

I actually saw this but again both sides are playing the numbers in whichever way it favors them. Considering the average small business owner made right around Obama's threshold, they are still looking at higher taxes. Somthing that people don't seem to realize is that most small businesses are setup as S-Corps or LLC's where it's considered a pass through. Google for more info. No matter which way you slice it, it's going to effect a lot more small businesses than Obama will ever admit.