Why the poor has to pay more taxes than the rich? Why big corporations don't need to pay taxes!?!?

Couldn't we make taxes relative to the income? Like, if you are poor, you pay 5% of your income, and as your income rises, your taxes also rises so that the percentage is always the same. Because what happens (at least in my country) is that the poor pay something like 80% of their income and the rich pay something like 1%. It's just ridiculous.

So, in other words.... wouldn't it be better if the rich would pay the same percentage as the poor pay? Or maybe, the increase in the percentage could increase slightly as the income increases...

You are requesting a flat tax. Although mathematically fair, it is considered regressive due to the utility of money. A person who makes 1,000,000 can pay 300,000 taxes and live very well on 700,000. A person who makes 20,000 needs that 6,000 for food and rent

Corporations never pay taxes, they pass that cost on to the consumer

Presently, the system is graduated. The poor, or lowest tax bracket, pay approximately 8%. Most, if not all, of this can be returned via deductions. Conversely, the wealthiest Americans pay 37%.

The corporate income taxes function in the same manner, with the largest earners paying just over a third. Dos is correct in that this cost is passed on to the consumer. Corporate net income is an after-tax number. That is, for determining gains minus losses, taxes are figured into the equation. So prices are raised to accomodate taxable losses.

An excellent example of this is the American sales tax. Theoretically, the tax is a surcharge on the seller for the privilege of selling. However, most Americans see it as a surcharge on the buyer for the privelege of buying, because businesses add the sum to their set price at the time of purchase.

I'm not sure what country you live in, but what you describe sounds fairly backwards. No western nation employs such a system.

You are requesting a flat tax. Although mathematically fair, it is considered regressive due to the utility of money. A person who makes 1,000,000 can pay 300,000 taxes and live very well on 700,000. A person who makes 20,000 needs that 6,000 for food and rent
But what if the poor needs to pay a smaller percentage, and as the income rises, the percentage rises with it? So, let's say... a person that makes 10,000 pays 1,000; while a person that makes 1,000,000 pays 500,000...?


Corporations never pay taxes, they pass that cost on to the consumer
Not quite. The taxes are usually shared, since the demand curve is downward slopping to the right...

Still, that's not what I've heard before...



The corporate income taxes function in the same manner, with the largest earners paying just over a third. Dos is correct in that this cost is passed on to the consumer. Corporate net income is an after-tax number. That is, for determining gains minus losses, taxes are figured into the equation. So prices are raised to accomodate taxable losses.
So, in the end the corporations don't pay anything.... :rolleyes:
Again, the same thing that I said above applies.


I'm not sure what country you live in, but what you describe sounds fairly backwards. No western nation employs such a system.
Yeah, I know... :rolleyes:

The cost of a sales tax to a producer is in lost sales. When the producer passes on the tax in the form of higher prices, then the quantity of goods demanded will decrease. The firm will sell fewer goods and profit will shrink. Why do you think they never include the tax in the advertised price? They want to minimize the lost sales due to this tax.

Depending on the demand for that particular good, the burden of the costs will be greater on the producer or consumer. Consider a 50 cent tax on every can of salt sold in the grocery store. Salt prices go up 50 cents, but the consumers do not really care. They will continue to buy about the same amount of salt, because salt is not a significant portion of income. The producers will lose few sales. Almost all of this tax the burden of the consumer.

Imagine that a $2000 sales tax was placed on only Toyota automobiles. Consumers would be very reluctant to pay this tax, and a very large number would purchase a Honda or other brand of vehicle instead. Consumers would then pay little of this tax, because many would avoid it entirely by purchasing another type of vehicle or none at all. Toyota would be left holding the short end of the stick as they have lost millions of dollars worth of sales.

These are extreme examples with many situations lying inbetween.

I didn't ask about the demand rules for taxes and stuff like that. All that I was doing was applying the concept of multipricing to a completely different field (i.e. taxes). Funnyly enough, when I started this thread I hadn't learned multipricing yet... :D :cool:

It seems like you are just asking for a progressive tax system. According to this site:
http://www.taxtips.ca/tax_rates.htm#FederalTaxRates
Canada does have a progressive income tax. The first $30,000 are taxed at around 25% and everything over $113,804 is taxed at around 45%. Inbetween those amounts are various graduations.
I'm not sure what you mean by the poor pay 5% of their income and the rich pay 1%. :confused:

Oh, you mixed it up. Here's what I said:

This was my proposition:
Like, if you are poor, you pay 5% of your income, and as your income rises, your taxes also rises so that the percentage is always the same.

This is somwehat what happens in my country:
Because what happens (at least in my country) is that the poor pay something like 80% of their income and the rich pay something like 1%. It's just ridiculous.

You mixed them up. They are two separate situations. ;)

In your first post you said you wanted a flat tax. This is when everyone pays the same percentage of their income.

Then you said this:
[QUOTE=TruthSeeker]But what if the poor needs to pay a smaller percentage, and as the income rises, the percentage rises with it? So, let's say... a person that makes 10,000 pays 1,000; while a person that makes 1,000,000 pays 500,000...?
[QUOTE]

Here a poor person pays 10% and a rich person pays 50%. This is a progressive tax system and is similar to the tax system in Canada.

So you seemingly changed from wanting a flat tax to a progressive tax, while claiming that Canada has a regressive tax system. Let me clarify that I am talking always about income tax here. Still-> :confused:

No. I said I wanted a progressive tax. My proposition was for the percentrage to increase as income increases. The other part of the message said what is the real case.

Look at my first question:
Why the poor has to pay more taxes than the rich?
Does that sound like I want flat taxes?

Than I said:
Couldn't we make taxes relative to the income?
Progressive tax. I didn't know the name of that, but now I do.

Couldn't we make taxes relative to the income? Like, if you are poor, you pay 5% of your income, and as your income rises, your taxes also rises so that the percentage is always the same. Because what happens (at least in my country) is that the poor pay something like 80% of their income and the rich pay something like 1%.
My emphasis added.

You said you want the percentage to stay the same. This is a flat tax.
You also said you want taxes to rise with income. This is ambiguous. In a flat tax system rich people pay more ABSOLUTE taxes. Ten percent of $100,000 is more than 10% of $30,000. The percentage is the same, but the richer person is paying more in taxes.
Moreover, this is the only way to reconcile this vague language. There is no way for it to be construed as a description of a progressive tax system.
Now you are trying to say that you meant you want the percentage of taxation to increase.

Don't worry. As you study economics more you will realize that the terminology is very important. It is often as precise as mathematical and hard science language.

My emphasis added.

You said you want the percentage to stay the same. This is a flat tax.
You also said you want taxes to rise with income. This is ambiguous. In a flat tax system rich people pay more ABSOLUTE taxes. Ten percent of $100,000 is more than 10% of $30,000. The percentage is the same, but the richer person is paying more in taxes.
Ok. That is where I screwed up.


Moreover, this is the only way to reconcile this vague language. There is no way for it to be construed as a description of a progressive tax system.
Now you are trying to say that you meant you want the percentage of taxation to increase.
Yeah...


Don't worry. As you study economics more you will realize that the terminology is very important. It is often as precise as mathematical and hard science language.
Ahhh.. I just got screwed up with percentage vs. not percentage... :o



Btw.... I read in the last edition of The Economist that transnational industries are actually paying less than they used to, in taxes. They used to represent 5% of the GDP, and now they represent only 1%, due to less taxation. So my first point is still valid :rolleyes: ;)

Some of that decreased tax revenue is due to different tax dodges that the corporations use. Japanese corps. are known for manipulating their prices to decrease foreign nations tax revenue. The domestic part of the corporations will charge itself very high prices for goods that they import to a foreign subsidiary, in the United States for instance. That subsidiary sells the final good in the United States, but since it has paid so high to buy the inputs from the domestic side there is little profit made in the United States. Taxes paid to the US are low and all the profit ends up at home anyway.

Well, ok. But most of the multinationals are from US anyways...

Couldn't we make taxes relative to the income? Like, if you are poor, you pay 5% of your income, and as your income rises, your taxes also rises so that the percentage is always the same. Because what happens (at least in my country) is that the poor pay something like 80% of their income and the rich pay something like 1%. It's just ridiculous.
This sounds ridiculous. What country are you from?

In the U.S., the more income one makes the more percentage of income tax he/she has to pay. The less income one makes thus results in a less percentage of income tax required to be paid to the point where if the income is so little, one does not even have to pay income tax and furthermore, may also be helped financially by the government through welfare, financial aids or housing systems.

This sounds ridiculous. What country are you from?
Brasil. But incredibly enough, a similar thing happen in the US. In the US, big corporations pay less then 1% of their income - that if they pay it at all!!


In the U.S., the more income one makes the more percentage of income tax he/she has to pay. The less income one makes thus results in a less percentage of income tax required to be paid to the point where if the income is so little, one does not even have to pay income tax and furthermore, may also be helped financially by the government through welfare, financial aids or housing systems.
Again, big corporations gain millions of dollars and they don't pay taxes. Specially banks....

These corporations are a group of people who already paid for their personal income taxes. So you want them to first pay about say, 30% for the corporation income tax then again pay another 30% for their own personal income taxes? Does this not mean these people end up paying more than 50% for taxes?

Let me try to break this down. A corporation makes $1,000,000 income and you would the corporation to pay $300,000 tax. With $700,000 left as personnal income for the owners of the corporation, you then want them to pay another $300,000 tax. Thus, only $400,000 is the net income that they are entitled to after earning $1,000,000?

You are thinking of a corporation as a person but it is not. A corporation is a group of owners who pay tax accordingly based on their income.

What about banks? They are also a group of owners who also pay their taxes accordingly!

I tought owner's equity was actually included in the corporation....?

In any case, corporations still pay around 1% and banks still don't pay taxes...

Couldn't we make taxes relative to the income? Like, if you are poor, you pay 5% of your income, and as your income rises, your taxes also rises so that the percentage is always the same. Because what happens (at least in my country) is that the poor pay something like 80% of their income and the rich pay something like 1%. It's just ridiculous.

Wow what country do you live in? That sounds like the reverse of the system that we've got in the US, the richer you get the higher the percentage of your income that you've got to pay in taxes.

*cough* Yeah, riiiiiiiiiiight.....
What about the big corporations? They don't pay taxes (or pay almost nothing)...

TruthSeeker,

let me try to be more clear. Except for those with too little income, every person in the US pays for his/her income tax. When a corporation makes money, this is income that will be paid to the owners of this corporation. These owners will then pay income tax on this same money that was paid to them. The more income will result in greater percentage of tax.

A corporation is not a person but it is a company owned by the people who will pay tax accordingly.

Maybe an example will help. Assume that you own a restaurant that generates $1,000 net income which ends up in your pocket before tax. Do you think you will be happy to have the government taxing the restaurant first as a business (say about $350) then taxing you again later as a person (say another $350)? You now have $300 left in your pocket after your restaurant made $1,000 income. Note that the $1,000 net income ends up in "your" pocket before tax which is actually your personal income; thus the restaurant is not to make money for itself but to make money for you as the owner.

Does the government tax the owner or the restaurant?

The owner.

What about sales tax? Does it go to the restaurant or the owner...? :D

Neither. Sales tax is paid by customers who are buyers while the restaurant owner is the seller. This sale tax does not go to neither the restaurant nor the owner but to the government; the owner simply collects sales tax on behalf of the government.

The problem I have with this is that the consumer doesn't know he is paying.

Which consumer doesn't know? I do not know of any buyer who does not know that he/she has to pay sales tax. Whether a buyer knows or not, I still do not see any problem because everyone still pays the same for sales tax (not knowing did not make a buyer pay more).

By the way, last time I heard, Florida and another state does not collect sales tax. Does anyone know what this other state is?

Neither. Sales tax is paid by customers who are buyers while the restaurant owner is the seller. This sale tax does not go to neither the restaurant nor the owner but to the government; the owner simply collects sales tax on behalf of the government.
I thought we would pay only a part of the tax...?

Which consumer doesn't know? I do not know of any buyer who does not know that he/she has to pay sales tax. Whether a buyer knows or not, I still do not see any problem because everyone still pays the same for sales tax (not knowing did not make a buyer pay more).

By the way, last time I heard, Florida and another state does not collect sales tax. Does anyone know what this other state is?

In europe, the taxes are not mentionned. You pnly see the total price.

I thought we would pay only a part of the tax...?
I assume you are still referring to sales tax. In fact, the buyer pays for all of the sales tax amount. The exceptions are when the sales are tax deductible such as uniforms, business travels...then not only the price but also the tax paid are deductible.

In europe, the taxes are not mentionned. You pnly see the total price.
Interesting. I live in US so did not know this. Do you mean that the price tag on an item for sale already include sales tax in it or does the final amount on the receipt is higher than the price tag amount because of sales tax addition? If the price tag includes sales tax in it, it appears to me that in this case the seller but not the buyer is paying for this tax. Now it is my turn to be confused...

Interesting. I live in US so did not know this. Do you mean that the price tag on an item for sale already include sales tax in it or does the final amount on the receipt is higher than the price tag amount because of sales tax addition? If the price tag includes sales tax in it, it appears to me that in this case the seller but not the buyer is paying for this tax. Now it is my turn to be confused...

Yes, in the UK you only see the total net price with the exception of some goods like computers where most purchases will be for bussiness use and not elegable for Value Added Tax. (They will always show the + VAT price in brackets anyway). It is the consumer who pays the tax regardless of how the price is presented.

In the UK, income tax is split into brackets. The first proportion is tax-free (£4000ish) When you earn over a certain figure you only payer the higher tax rate on the amount thats above.

E.g. If you earn £35,000, you keep 100% of 4,000 + 80% of 16,000 + 60% of 15,000
(not actual rates)

Is this not the way it is in the States?

if we start taxing people that badly what would be the incentive for them to work harder and earn more money if in the end they end up with only a few more bucks in their pocket and much much more sweat bore for it?

in states there is brackets basicly
everyone up to 18k pays 10% if u earn below 12 i think u pay 0%
26k + is 18 or 15% 39999 is 23 or 26 percent and everything over 125999 is 37 or 35% all of this is approximate...
if u wanna know just go to irs.gov

Sweden and the UK have tax laws very much like the ones being proposed here. Once you become a millionaire, you get to keep almost nothing from every additional pound or kron you earn. That's why so many of the most successful people in those countries take up residence in the U.S. As draconian as our tax laws are, from their perspective this is a tax haven. If you want to see all the talented people leave the U.S. and become citizens of the Caiman Islands or whichever country has the lowest taxes, just try raising the highest tax bracket back to the level it was at thirty years ago.Last time I heard, Florida and another state does not collect sales tax. Does anyone know what this other state is?I think it's Nevada. It doesn't have a personal income tax either. They make so much money by taxing the casinos that they don't need any other revenue. I think that's just fabulous. Anybody with half a brain understands that casino gambling is a sucker bet, in the long run you always lose. Therefore, taxing gambling is a tax on the stupid. Since taxation tends to destroy its subject, taxing stupidity will eventually result in a more intelligent population. ^_^

Sweden and the UK have tax laws very much like the ones being proposed here. Once you become a millionaire, you get to keep almost nothing from every additional pound or kron you earn. That's why so many of the most successful people in those countries take up residence in the U.S. As draconian as our tax laws are, from their perspective this is a tax haven. If you want to see all the talented people leave the U.S. and become citizens of the Caiman Islands or whichever country has the lowest taxes, just try raising the highest tax bracket back to the level it was at thirty years ago.
That sounds awesome... Care to explain more? ;)

E.g. If you earn £35,000, you keep 100% of 4,000 + 80% of 16,000 + 60% of 15,000
(not actual rates)

Is this not the way it is in the States?
Yes! Very similar. :)