Corporate Tax
Larry Young, Jr.
Fall 2008
Tuesday, August 26, 2008
Subchapter C – C Corporations (History)
- p. 7; Historically individual federal rates were as high as 70%.
- Corporate rates were at 46% (check this) before Reagan’s administration as President. Of course there were some lower corporate rates at an income level b/t $0 and $75K. Once you reach approx. $320K, you are at a flat 34% today. This is b/c you recoup the savings from the earlier lower rates. This is today.
- At this time, many people preferred to have the limited liability of a corporation and the lower tax rate. Of course, you know that a corporation pays tax on its income. The corporation is a separate, distinct tax payer from the individuals managing the corporation.
- Corporate profits are distributed as dividends. There is a shareholder tax on dividends. This is the second level of tax on corporations.
- Domestic International Sales Corporation – Exports flow through a company and this company gets a special tax break on the sale of these goods. This was taken out of the tax code. It would put back again and was called a Foreign International Sales Corporation. Under GATT, you couldn’t do this. This is different from a value added tax. A value added tax is not an income tax. The sales tax is a consumption tax. If you are not consuming it, for example in Germany, you don’t have to pay it. The value added tax does not apply unless you consume it in Germany.
- A U.S. Federal Income tax puts U.S. exports at a great disadvantage.
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