Politically Correct Taxes....

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...

 

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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

 

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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.

 

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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...?

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...

So, in the end the corporations don't pay anything....

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Again, the same thing that I said above applies.

Yeah, I know...

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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...

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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%.

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

This was my proposition:

This is somwehat what happens in my country:

You mixed them up. They are two separate situations.

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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:

 

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:

Does that sound like I want flat taxes?

Than I said:

Progressive tax. I didn't know the name of that, but now I do.

 

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.

 

Ok. That is where I screwed up.

Yeah...

Ahhh.. I just got screwed up with percentage vs. not percentage...

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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

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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...

 

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.

 

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!!

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...

 

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)...