US corporation tax rates

[Urban Ranger]

I am doing an assignment, which, among other things, requires US tax rates on corporation profits. I tried looking on the IRS website, but they are well hidden somewhere. Does anybody have a good pointer to it?

A related question is: do US states tax corporate profit also, or is it strictly a Fed (IRS) thing?

[JohnT]

US states tax corporations, and not only just on profit. South Dakota, for example, charges corporations a sales tax of 6% on all sales in SD, regardless of what the corporation does.

The basic federal corporate tax rates are:

http://www.irs.gov/pub/irs-pdf/i1120_ay.pdf

(Page 17)

Income range = Tax + % of the amount over $X

$0/$50k = 15% + $0
$50/75k = $7,500+ 25% of the amount over $50k
$75/100k = $13,750 + 34% of the amount over $75k
$100/$335k = $22,250 + 39% of the amount over $100k
$335/10m = $113,900 + 34% of the amount over $335k
10m/15m = $3.4m + 35% of the amount over 10m
15m/18.3m = $5.1m + 38% of the amount over $15m
18.3m - onwards = taxed at a flat 35%.

For example, Urban Ranging Enterprises, a Chapter C corporation, earns $200,000 in taxable income. Your tax would be

=$22,250 + ($100,000*.39)
=$22,250+ $39,000
=$61,250

or a 30.6% tax rate on your income. The remaining funds, if they get paid as dividends to Urban Ranger, get taxed again at the personal capital gains rate, making the effective tax on corporate profits as high as 50%... and that's before the states and the local governments take their share.

Hope this helps!

[Lefty Scaevola]

The biggest difference in Federal comporate income tax rates from individual is capital gains. In coporations these are taxed at a maximu 36% rate, rather than the the 20% (10% for lower incomes) rate for individuals.

[Urban Ranger]

Thanks all

[DAVOUT]

In the Federal Budget, income tax and corporate tax amount respectively to :

1994 : 543.1 and 140.4 Billions $
2002 : 858.3 and 148.- Billions $

[red_jon]

Is there any country of Earth that simply doesn't have taxes?

[Zkribbler]

Originally posted by red_jon
Is there any country of Earth that simply doesn't have taxes?

Monaco. Instead it uses the profits from its casino.


In the corporate-tax argument, what no one points out is that, under the law, a corporation is its own person. However, unlike me & you, it doesn't get taxed on its income, it gets taxed only on its profits. O, if I were only to be taxed on the money I have left after expenses!

So yeah, corporations pay federal taxes and state taxes too.

What Bush's new tax plan wants to do is to make the transfer of wealth from the corporate person to its shareholders a tax-free transfer. That is, the shareholders will not have to pay income tax. Better, if the transfer of wealth from the corporate person to its employees were made tax free. That way, the workers wouldn't have to pay income tax.

By the way, if the shareholder really want tax-free income from the corporation, all they have to do is make it a partnership. Presto, a partnership is its owners, and so there's not transfer of weath. Of course, unlike a corporation, the owners of a partnership are personally liable for the partnership's debts.

[Urban Ranger]

Thanks much.

One more quick question, has the tax rate been changed in the recent years, some time in the 1990's?

[DarthVeda]

I've come to the conclusion that the less the wealthy are taxed, the more they use to pamper themselves. They have no inclination of trickle-down.

"Oh looks like I have that extra $6 million in my business this year, time for bonuses for the management! I always wanted that cottage on the lake and my own private jet!"

[Ned]

Originally posted by red_jon
Is there any country of Earth that simply doesn't have taxes?

Interesting queston. I think Alaska has a negative income tax because of its oil. I wouldn't be surprised if the same exists in the Persian Gulf region for the same reason.

[Sten Sture]

Originally posted by JohnT
The remaining funds, if they get paid as dividends to Urban Rangerget taxed again at the personal capital gains rate,

Actually, dividends are taxed again at the individuals regular income tax rate, not at the lower capital gains rate. (iirc)

[Japher]

Better, if the transfer of wealth from the corporate person to its employees were made tax free.

That is considered a buisness expense so the coorporation doesn't get taxed on it. Maybe I read it wrong, and your trying to say not to tax on income of employees... that wouldn't work.

By the way, if the shareholder really want tax-free income from the corporation, all they have to do is make it a partnership. Presto, a partnership is its owners, and so there's not transfer of weath. Of course, unlike a corporation, the owners of a partnership are personally liable for the partnership's debts.

Than what's the point? No transfer of wealth?

Eliminating the tax on dividends, temporarily, is a good thing IMO. It will encourgage ppl to put money back into the economy with the hope of a tax free reward... kind of like bonds, only the bond yield is so low no will but it. This way I can buy stocks that are yielding at 4-5% with all the implication of the bonds... Of course I need to use taxable income to get it. Short term Roths...

I geuss Zkibbler I don't understand what you are saying... Is this a bad thing or a good thing? Why would your solutions benefit the economy more? Why would a partnership over an investor be better? Too many cooks spoil the pot...

[JohnT]

"What Bush's new tax plan wants to do is to make the transfer of wealth from the corporate person to its shareholders a tax-free transfer."

No, what it does is eliminate the fiction that a corporate profits and shareholders dividends are two separate items when, in fact, they are not.

[JohnT]

Anyway, the tax on dividends is moot for Urban Ranger Enterprises as UR, in an attempt to escape the dividend tax, elects to pay himself a $195,000 bonus at the end of the year, thereby showing corporate profits of only $5,000. This will allow the $195,000 to be taxed only at his personal income tax rate, saving a huge chunk in dividend-related income taxes. While he actually pays a bit more to the government in income taxes (about $9,000, bringing the tax bill to $70k) than the corporation, he will not get hit with an additional dividend tax of around $45,000. Essentially, by my back of the envelope calculations, UR has the option of:

1. Paying out the pre-tax profit as a bonus, suffering a tax hit of $70,000.

or

2. Paying taxes on the profits, then paying out the after-tax profits as a dividend to himself (paying more taxes on that money) thereby suffering a total tax bite of $107,000.

The choice is so easy, even a could figure it out. Enjoy your $37,000 windfall!

[Japher]

He could also employ his family or dependents, pay for medical insurance, car insurance, other "requirements" for his buisness/life prior to issuing that bonus... Work from home and it gets even better...