Dear phil_will1,
"That assumes no cost savings from Wal-Mart's suppliers which get passed up the supply chain. To the extent that Wal-Mart is selling imports, that is a reasonable assumption. However, to the extent that they buy US produced goods, it isn't reasonable at all."
I agree.
But I've been playing with "cascading" spreadsheets for the last couple of days, sticking in values that I find when actually looking at big company effective tax rates, and putting in companies that one might expect at different levels (manufacturers, distributors, retailers, service providers like airlines, etc.). I don't get to 17%. Or 7%. In fact, if you try to come up with representative examples of manufacturers (Whirlpool, GE, Dell), and distributors (TechData, Ingram Micro), and retailers (Wal-Mart, Sears), and other sorts of "end-consumer companies" (airlines, which over time, don't actually make profits), you usually come out with values in the 1% - 2%. Sometimes less, sometimes more. Especially when you realize that you're likely to have scattered through many value chains one or more of the 92% of business entities that pay no corporate income taxes at all.
But the OVERALL level of "embedded" corporate income tax across the entire economy is already known. It varies from year to year, but is usually around 2% or less.
sitetest
But the OVERALL level of "embedded" corporate income tax across the entire economy is already known. It varies from year to year, but is usually around 2% or less.And that assumes that the incidence of the corporate tax is fully on the consumer and not labor or the capital holders, which is almost certainly not the case.
TABLE 1 |
|||||
|
Raw Mat
Producer |
Intermed
Manufacts |
Final
Manufact |
Distribut/
Wholesale |
Small Retailer
(S Corp) |
|
| Input |
$ -
|
$ 1,000.00
|
$ 2,500.00
|
$ 6,250.00
|
$ 7,187.50
|
| Value Added |
$ 1,000.00
|
$ 1,500.00
|
$ 3,750.00
|
$ 937.50
|
$ 2,156.25
|
| Price |
$ 1,000.00
|
$ 2,500.00
|
$ 6,250.00
|
$ 7,187.50
|
$ 9,343.75
|
| Pre-Tax Profit Rate |
7.00%
|
3.00%
|
13.00%
|
1.00%
|
10.00%
|
| Pre-Tax Profit |
$ 70.00
|
$ 75.00
|
$ 812.50
|
$ 71.88
|
$ 934.38
|
| Effective Tax Rate |
20.00%
|
20.00%
|
15.00%
|
20.00%
|
0.00%
|
| Tax |
$ 14.00
|
$ 15.00
|
$ 121.88
|
$ 14.38
|
$ -
|
| Accumulated Tax |
$ 14.00
|
$ 29.00
|
$ 150.88
|
$ 165.25
|
$ 165.25
|
| Accumulated Tax as Percentage of Price |
1.40%
|
1.16%
|
2.41%
|
2.30%
|
1.77%
|
TABLE 2 |
||||
|
Raw Mat
Producer |
Intermed
Manufacts |
Final
Manufact |
Large Retailer
(C Corp) |
|
| Input |
$ -
|
$ 1,000.00
|
$ 2,500.00
|
$ 6,250.00
|
| Value Added |
$ 1,000.00
|
$ 1,500.00
|
$ 3,750.00
|
$ 2,062.50
|
| Price |
$ 1,000.00
|
$ 2,500.00
|
$ 6,250.00
|
$ 8,312.50
|
| Pre-Tax Profit Rate |
7.00%
|
3.00%
|
13.00%
|
3.50%
|
| Pre-Tax Profit |
$ 70.00
|
$ 75.00
|
$ 812.50
|
$ 290.94
|
| Effective Tax Rate |
20.00%
|
20.00%
|
15.00%
|
15.00%
|
| Tax |
$ 14.00
|
$ 15.00
|
$ 121.88
|
$ 43.64
|
| Accumulated Tax |
$ 14.00
|
$ 29.00
|
$ 150.88
|
$ 194.52
|
| Accumulated Tax as Percentage of Price |
1.40%
|
1.16%
|
2.41%
|
2.34%
|
TABLE 3 |
||||
|
Raw Mat
Producer |
Intermed
Manufacts |
Boeing
Aircraft |
Airline
|
|
| Input |
$ -
|
$ 10,000,000
|
$ 25,000,000
|
$ 62,500,000
|
| Value Added |
$ 10,000,000
|
$ 15,000,000
|
$ 37,500,000
|
$ 62,500,000
|
| Price |
$ 10,000,000
|
$ 25,000,000
|
$ 62,500,000
|
$ 125,000,000
|
| Pre-Tax Profit Rate |
8.00%
|
4.00%
|
8.00%
|
0.00%
|
| Pre-Tax Profit |
$ 800,000
|
$ 1,000,000
|
$ 5,000,000
|
$ -
|
| Effective Tax Rate |
20.00%
|
20.00%
|
20.00%
|
0.00%
|
| Tax |
$ 160,000
|
$ 200,000
|
$ 1,000,000
|
$ -
|
| Accumulated Tax |
$ 160,000
|
$ 360,000
|
$ 1,360,000
|
$ 1,360,000
|
| Accumulated Tax as Percentage of Price |
1.60%
|
1.44%
|
2.18%
|
1.09%
|
In 2001 (for which a goodly amount of numbers are available), taking only major industries (Form 1120) from the IRS SOI Tax Stats it seems that almost a million businesses had $595.4 Billion subject to tax and actually paid $204.8 Billion. This appears to me to be a tax rate of about 34.4% and nothing like the low percentage numbers you're been hyping for tax rates.
'Course the IRS is probably wrong, right?
In addition, there are many more S-corps, partnerships, and individual proprieterships and they pay taxes as well possibly even in a higher tax bracket but surely not dramatically lower.
Perhaps you have some better source thatn the IRS SOI?