New study is bolstering drive to shift tax burden from corporations to investors
A new study showing that a shrinking fraction of shareholders of U.S. corporations pay taxes on dividends is bolstering a drive to revamp the corporate tax system.The specter of double taxation, which animates complaints about today’s U.S. corporate tax code, is receding, according to a new study from the Tax Policy Center. Tax-exempt and tax-preferred entities—such as 401(k) plans and other retirement accounts—own more than 75% of U.S. corporate stock, nearly opposite the prevailing pattern from 50 years ago, the study said.
“We can either strengthen corporate taxes by closing corporate loopholes
or shift taxes more aggressively to the shareholder level,” said Mr.
Rosenthal, whose organization is a project of the Urban Institute and
Brookings Institution. “Shifting taxes to shareholders is much more
difficult if few shareholders pay tax.”
Over the past few decades, corporations have cut their tax bills, including aggressive shifting of profits into lower-tax countries.
And, as individual marginal tax rates declined below the combined tax rate on corporations and taxable investors, new firms chose to operate as partnerships even as they grow. Such companies pay just one layer of tax, because their business income passes through to owners’ individual returns. More than half of business income is now taxed this way, up from 21% in 1980, according to another recent study.
http://www.wsj.com/articles/fewer-shareholders-pay-u-s-taxes-on-dividends-1463615621
Will this be a way of closing a loophole or is this creating another giant loophole for corporations? Also, what do you guys think about the fact that this study was done by the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution?
Not sure I see the issue. Tax deferred savings accounts are a great tool for everyone. My only worry is that the government one day will make seniors pay taxes on their Roth IRA earnings in the future. Only time will tell.
ReplyDeleteThis would be a nightmare if it were to occur. Lots of people depend on the fact that these accounts are not taxed to ensure they have enough money for retirement. In my eyes, this is almost as crooked as tax loopholes.
DeleteI agree with Kenny I think that tax deferred savings accounts are a very important and useful for everyone and that everyone should be using. I actually think that the shift towards retiring more in 401Ks and other retirement plans is a good thing because these plans, if used correctly, can set up people up to be in better condition for retirement than corporate stocks.
ReplyDeleteI'm not so sure whether this plan would be effective in closing loopholes for corporations. Large corporations have been avoid tax in various ways (we read examples in Dark Money). This plan could possibly increase their frequency of tax avoidance. I don't think it would be happening anytime soon because political reasons just like the article said.
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