The tax rate expressed as a percentage of GDP has little or nothing to do with embedded tax costs which is what the discussion is about. Tax costs (excluding payroll/withholding and compliance costs) are determined from profits, not revenues, but I suppose you did not know that. Revenues themselves show nothing about the cascading of embedded taxes. To determine the cascading embedded taxes it is necessary to look at income tax rates so that the build-up due to taxes can be determined at each level.
The simplified example I have given shows this mechanism quite well and is purposely simplified for easy understaanding. The post #88 shows the example and it clearly is discussing cascading embedded taxes and they are shown as "tax costs as % of sell price" and NOT as a % of revenue. Embedded tax is calculated from the margin of the business and their tax rate. Revenue is unrelated to cascading embedded tax and trying to express that amount of tax as a percent of revenue is completely meaningless since it shows nothing about how the mechanism works.
The meaningful figures are the income subject to tax and the taxes actually paid. The latter divided by the former is the rate of taxation for the particular business - just like they taught you in high school, that gives the tax rate for the business. It is this rate that figures importantly in cascaded tax costs.
As for groanup's opinion of whether or not payroll taxes of any sort should be included is of no importance to the discussion at hand - and perhaps he's correct. That once again is irrelevant since the example was defined as not including payroll/wihholding or compliance costs.
As for your statement:
"He seems to think that if you're not paying corporate income taxes, well, you're not paying corporate income taxes. "
Well, DUH - who's to argue about that. That's like saying if you're scratching your head, you're scratching your head.
The example in #88 is for a business (period) and not just Subchapter C corporations as you keep trying to pretend. They all have the same mechanism effecting the build up in prices. The fact you don't understand his is your problem, not mine. As for "... evidence and reason arrayed against me ..." I see very little of either but I do see a bunch of meaningles nonsense presenting numbers that are completely unrelated to the discussion but presented to try to fool others into thinking they are meaningful even though off-topic.
In post #310, the figures from the IRS SOI publication for 2001 show the detailed information that the C-corp tax rate (which you seem to think is the entire business world) is 34.4% rather that the 25% figure used in the original cascading example. Using that actual overall figure the cascading embedded taxes become:
LEVEL 1 2 3 4 5 6 INPUT $1.00 $1.44 $2.08 $3.01 $4.34 $6.27 33.00% PROFIT MARGIN $0.33 $0.48 $0.69 $0.99 $1.43 $2.07 34.40% TAX RATE $0.11 $0.16 $0.24 $0.34 $0.49 $0.71 SELL PRICE $1.44 $2.08 $3.01 $4.34 $6.27 $9.05 Accumulated tax costs $0.11 $0.28 $0.51 $0.86 $1.35 $2.06 Tax costs as % of 7.86% 13.31% 17.09% 19.70% 21.51% 22.77% sell price
So you can see that using the actual tax rate for your C corps results in a much faster build up of emedded tax costs. This is probably more true to the real world effect than the original illustrative example since it now uses the figures from what you seem to think is the whole business universe (and it isn't) - the major industries. Your statement about these C corporations:
"These businesses just don't pay a lot of taxes. "
... is shown to be the nonsense it is - they pay a good amount of taxes and at a 34% (plus) rate. To even try to fool readers into thinking that these amounts do not become embedded into prices is - truly - nonsense. Even your compatriot Nightie is now urging the use of a much higher figure for embedded taxes. Perhaps you should straighten him out???
Dear pigdog,
* chuckle *
First, you're only showing a 25% tax rate in your latest table. LOL.
In Level 1, there is a total of 44 cents profit (the sale price is $1.44, the input is $1, that leaves 44 cents for total pre-tax profit), and you're paying 11 cents. That's 25% of the pre-tax profit (it's an inclusive rate when talking about income taxes).
In Level 2, you have 64 cents of pre-tax profit, and 16 cents of tax, for a rate of 25%.
And so forth (although your final levels come to about 25.5%).
Anyway, your corporate income taxes as a percentage of revenues come out to around 11%. That's unusually high for any corporation.
Tell ya what. I'll make a deal with you.
You find 20 Fortune 500 companies that pay 11% of their revenues in federal corporate income taxes (remember to try to estimate their state corporate income taxes).
I'll find 20 Fortune 500 companies that pay less than half that amount - 5% or less of their revenues in federal corporate income taxes.
I don't know if 20 Fortune 500 companies exist that pay 11% of their revenues in federal corporate income taxes, but if you find 20, we'll each go for another 20. And we'll see who runs out first.
If you think that your spreadsheet represents typical companies, you should be able to back it up pretty easily, wouldn't you say?
I'll even give you a head start, pigdog. I spend a lot of time going over income statements of publicly-held companies, and thus, I'm aware of at least one company that pays approximately 11% of its revenues in federal corporate income taxes. It's a good one, too. It's Microsoft.
Now you only need 19 more.
LOL.
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